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Attorneys general warn against federal payday loan regulation

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A bill in Congress that would extend federal regulation to the payday lending industry would pre-empt state laws and undermine consumer safeguards, Indiana Attorney General Greg Zoeller warned in a letter signed by 40 attorneys general.

Zoeller warned House and Senate leaders in both parties against adoption of HR 6139, the Consumer Credit Access, Innovation and Modernization Act. The bill proposes to issue federal charters to payday lenders who would be required to operate within regulations set forth in the bill. The proposal is before the House Committee on Financial Services.

“It’s critical for states to both preserve consumers’ access to alternative forms of credit and retain the ability to take quick action against short-term lenders that prey on those already in financial distress,” Zoeller said in a statement issued Friday. “This joint effort among attorneys general underscores the importance of killing this federal legislation that would provide no significant protections for consumers and have unintended consequences.”

Under Indiana law, payday lenders who make small loans in a range of about $50 to $500, typically with repayment terms of two weeks, may charge annual percentage rates of as much as 391 percent. Consumer advocates say the practice is predatory and forces most cash-strapped borrowers into a cycle of costly, frequent borrowing.

The proposed federal regulation would, among other things:

  •     Create National Consumer Credit Corporation charters that would be non-depository institutions;
  •     Forbid loans of less than 30 days;
  •     Offer extended payment options for loans of less than 120 days.

But Zoeller said the bill lacks specific standards and would let lenders sidestep more stringent state regulations. He said the proposal also would exempt loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act and substitute a cost metric.
 
Also signing the letter were attorneys general from Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Guam, Hawaii, Idaho, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
 


 

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  • nicodemus writes
    Thanks Bryan actually I am not brave like Paul or you but rather a Nicodemus. But just like the authors of federalist papers I'm going to exercise my own right to write under pseudonym in spite of the chilling effects a-blowing.
  • hat tip
    JOhn, I hold you in very high regard, thanks for sharing your thoughts. I hope we can continue to meet here even after you join the likes of me and Ogden for being a fearless dissident who is unwilling to say that 2+2=5.
  • Vix pervenit
    Bryan, fascinating story from your public service. I appreciate your experience and am mindful of the man sound reasons bureaucrats should not be involved in setting prices. And in a way interest is the price of credit. I have read Road to Serfdom by Hayek and argued laissez faire so much in my past that I'm ashamed of it now with that added "life experience" I lacked when younger. Life experience has taught me that "just because there are foothills does not mean there aren't mountains." Ie, just because it is hard to tell if 18% is too much for bad credit risk doesn't mean that it's hard to tell that 100% plus is usury for anybody. The point is that super bad credit risk person has no business borrowing money at all. The state does have a legit role in protecting them from themselves just as it does in many other areas of human life. As for your last remark, I do not agree that our system of private enterprise requires usury. I would point to the well functioning economies of various Muslim nations that, based upon religious law, specifically forbid the charging of compound interest ("riba") as "haraam." And yet they are able to accomplish both large scale public finance and also small scale consumer lending. So no I respectfully reject your assertion on those empirical grounds. And we don't need to resort to Sharia for inspiration. Aquinas is a source for so much of Western thought it would be hard to say where his influence begins or ends. Likewise in continental economies there were centuries of successful social commerce without modern free market laissez faire capitalism, though not surprisingly it would seem that usury was at least partly legalized by old Henry VIII. Yet there remain efforts to limit the harm. Such as the loan sharking statute http://www.law.cornell.edu/uscode/text/18/892 Many liberterians would repeal that law as well. I have thrown Ayn Rand over-board and now I am sticking with PLato and Aristotle and Aquinas on this one.
    • Here is an expert on the subject
      "For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still." -John Maynard Keynes
    • Here is an expert on the subject
      "For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still." -John Maynard Keynes
    • Nanny State?
      John, thank you, you are better educated than me as to this discussion. But I may have you on experience, since I headed up the Kansas Consumer Protection Division 2003 - 07. The payday loan folks lobbied us for a blessing, which we did not give. Some who worked for me wanted, much like you, to issue the opposite, and our division had fought them prior to my arrival. We also had many complaints from consumers alleging the rates they were paying to constitute usury. After reflection and real world experience, I came to the question of who was I to decide that 18% was acceptable, but 19% usury? Or was it 22%? Who was I too say? Just becuase I had access to the AG's signet ring? Did not work for me, AND .... is not our entire system built on usury, that is lending of $$$ at a profit for time run? If we ended all usury, absolutely defined, would our post modern, post capitalist economies even function.
      • usury is not a social good
        bryan, my source for teaching on the social evil of usury include both pagan Greek philosophers and St Thomas Aquinas. As you doubt know they came long before Pat Robertson. One need not be a Catholic to appreciate this. Even in Protestant England and Waspish America, for centuries there were laws against usury. Likewise Marxists have had a lot to say about usury too. The evils of usury are plain for all to see. As for the markets. They are not human they are mathematical constructs which aggregate human marketplace choices. They are not going to be the "invisible hand" that does anything especially good nor especially bad. That is a pretense of Adam Smith and his cronies. The market price for anything is just a point on a graph. It shows what a buyer and seller of X will both agree upon for a trade of X. That is all. markets represent price decisions and there are markets for social evils as much as social goods; markets for the illegal as well as the legal. Legislators are called upon to consider the social good which is definitely more complicated than GNP. Economically anti usury laws function by setting a price ceiling on credit. That has the certain effect of cutting off credit for those who are bad credit risks. That is a SOCIAL GOOD NOT A SOCIAL EVIL. Contemporary loan sharks should not be allowed to "give people enough rope to hang themselves with." That should go for big banks in the subprime credit card market just as much as payday lenders or car loan outfits that will sell and repo the same car over and over and over again for enough down payment. But especially it should go for the big banks. The failure to recognize what is usury is part of what got us into the whole 2007 mess. The failure to understand usury is behind the LIBOR scandal, the overinflation of the currency by the Fed Reserve, and a whole host of deriavative social ills that were not in previous generations possible prior to the US supreme court judicial fiat unilaterally striking down well functioning state laws against usury which were perfectly constitutional, and the Fed Res System putting the pressure on everyone to 'Liberalize" lending restrictions. Glass Steagal act: was it not a fine piece of Rooseveltian legislation? I can think of a lot of things they did in that era which I dont like but Glass Steagal was a gem of that era.
      • Trust the market?
        John Smith, if we cannot trust the market to regulate the worth of capital in its most liquid form, what can we trust it to do? I say just make sure all terms are clearly and unambigiously disclosed and let the market lend money. Christians can still denounce and still avoid, but this should not be given the theological solution you crave. You are not a Pat Robertson theonomist, now are you? ;)
        • usury is bad for society. make it illegal. learn from history!
          Greek philosophers, the Laws of Moses, and Chrsitian saints alike considered usury a sin and social evil. And yet, US sup ct blackrobes decided in the 1980s that state anti usury laws would be struck down as impediments to commerce. The Greenspan and liberterians and global-bankers jumped into the subprime loan business with both feet and it ended up in 2007's meltdown. Today there is precious little corrective action having been taken and the usurious money-lenders who would previously have been called loan sharks blather on about free markets and all this other excuses for their rackets. This ought to be illegal and rein in the pawnbrokers too while you're at it. USed to be republicans had some knowledge of Christian social ethics and were willing to put it into law-- now they're all brainwashed by Rand, Greenspan, Freidman, et al. the same crowd that backed Pinochet and lead us to ruin in 2007. Pathetic. You have to get a Marxist to talk sense sometimes. Crazy times these. Its not clear to me where Zoeller is really coming down on this. I think he is a swell AG. But instead of mouthing misplaced federalism and states rights and libertarian apologia, he ought to look back at the conservative Christian and Roman Catholic social traditions in America and England and Europe that for centuries forbade usury for the good of society. Republicans need to step up and act for the good of society not just banks and moneylenders.
        • Pay Day Loan
          If you are facing a financial lurch, and you need a short term loan that are very quick and great rates too, you should not hesitate visiting pay-day-loan.co.za, the right place for getting pay day loans at the right time and affordable rates as well.
        • Attorneys general warn against federal payday loan regulation
          This joint effort among attorneys general underscores the importance of killing this federal legislation..... Regards, Bizworldusa
        • Payday Loans
          The feds need to keep their noses out of state business like the constitution states!

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        1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

        2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

        3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

        4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

        5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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