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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. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

        2. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

        3. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

        4. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

        5. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

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