Thursday, November 19, 2009

Neither a borrower nor a lender be

By Capt. Fogg

And he said unto them that stood by, Take away from him the pound, and give it unto him that hath the ten pounds.

- Luke 19:24 -


Once upon a time, there were people who would lend you money at high rates of interest. We called them loan sharks and we put them in jail if we could catch them. We had usury laws to protect the public from being forced into ruinous transactions. We were just inches away from Marxism.

Then came the deregulators who told us that it was toxic government interference and was depriving us of our "freedoms" to apply the same laws to that class of supercitizens known as corporations, and so now we are free to borrow at rates Don Corleone wished he could have charged. Sure, some states jumped in and capped payday loans and the government "protected" the military from being charged more than 36%, but of course that's an outrageous assault on our "freedoms" and, sure enough, the lobbyists came out of the woodwork and bought themselves a House subcommittee which went to work legitimizing loans with a 391% APR. For many in the payday loan business, that's not enough.

H.R. 1214, introduced earlier this year by Congressman Rep. Luis "dances with jackals" Gutiérrez [D-IL4], is still in committee. Yes, Luis is a Democrat, let's give credit where it's due, and Luis, who rose from poor Hispanic roots in Chicago promising to help others like him is now the champion of legalized juice loans and the big banks that screw the little guy in a big way.

The congressman got into trouble last year for getting a $200,000 loan from a contractor for whom he had intervened with the zoning board, but I'm sure he isn't paying 391%. A competing bill from Congressman Joe Baca would prevent states from capping rates at all and would allow much larger add-on fees and charges, but the really great feature would allow you to roll over the loan indefinitely, racking up that 400% or so until you're forced to commit suicide.

Meanwhile, for the rest of us who aren't desperate enough with trying to pay medical bills and mortgages we can't afford, the credit companies are out to protect our freedom, too. Faced with having to warn us they're tightening the screws in the near future, they're tightening them now without warning. I got a letter yesterday from my friendly MasterCard folk -- I won't mention the name, but it rhymes with Citibank -- informing me that since I've been such a good customer for 25 years and always paid the full balance on time, they would raise my interest rate to over 20%. Well, to tell the truth, there was a time or two when I got the unpostmarked bill on or after the due date, although the last two times they tried that I'd switched to e-bills and had documentary proof that they sent the bill too late to be paid on time. They refunded the charges, which would have amounted to nearly 100%, but I never got an apology for their attempt at petty larceny and I don't expect a letter of appreciation for my part (and yours) in bailing them out when they choked on their own greed.

Yes, I know, when the Republicans justify their crimes by insisting the Democrats aren't pure at heart either, they don't avoid the guilt, but they're not always lying.

(Cross-posted from Human Voices.)

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  • Hi there, I'd like to give you the other side of this argument.
    CFSA is the national trade association representing responsible payday lenders. With membership representing more than half of the payday advance outlets nationally, CFSA promotes laws and regulations that protect consumers while preserving their access to credit options. The association also works on behalf of members to support and encourage responsible industry practices.
    CFSA supports regulations that ensure the product is used responsibly and are doing our part to encourage responsible use. We want customers to use payday advances wisely and we want the service to be a solution for individuals who need low-dollar, short-term credit. To that end, CFSA member companies have taken a significant step forward in our ongoing commitment to responsible lending.
    Payday advances play a necessary role, providing hard-working people with a reasonable, well-regulated option for meeting unexpected or unbudgeted expenses and other short-term financial needs.
    Payday advances are small, unsecured, short-term loans, usually due on the borrower’s next payday. The average loan is $300 and the typical fee is $15 to $17 per $100 borrowed.
    The payday advance industry exists because we offer our customers a product that is more desirable than the alternatives.
    Customers use payday advances to cover small, unexpected expenses between paydays. They are people who have a bill to pay today and choose between bouncing a check or paying overdraft fees, late bill payment penalties or credit card late fees, asking family for money or pledging personal possessions as collateral.
    Payday advances are two week, not annual loans. For each $100 advanced, customers pay a typical fee of $15-$17.
    Because payday loans are two-week loans they cannot be offered at the same annual rates as annual credit products such as credit cards, auto loans and home mortgages.
    The only way to reach the much-hyped triple digit APR is to take out one advance and continue to renew the same advance every two weeks for an entire year. State laws and industry best practices do not allow this to happen.

    Now, I understand that there are payday lenders out there who do take advantage of people, but the majority are reputable ones provide a needed service at a reasonable cost.

    By Anonymous PaydayLendingRep, at 5:22 PM  

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