by Ira Dember
America has 30,000 post offices — mostly in lower-income zip codes where bank branches are vanishing and payday lenders spread like toadstools after rain — making a public option for basic financial services a no-brainer. In this article Ira Dember talks about how the Consumer Financial Protection Bureau proposed crackdown on predatory pay day lenders is only half a solution. Without an alternative, "desperation borrowers" are left with nowhere to turn. Reform — without an alternative — will harm millions of hardworking families who urgently need ready access to affordable small loans between meager paychecks. Dember tells us that no one — repeat no one — has proposed any solution that even comes close to addressing this need, except the Inspector General of the United States Postal Service, David Williams.
In March, the Consumer Financial Protection Bureau proposed rules to crack down on predatory payday lenders. These rules would prevent many payday lending abuses and give consumers a way out of lenders' debt trap.
Under the CFPB's new rules, borrowers would first have to show they could cover their basic living expenses while repaying loans. Lenders could skip "means testing" and instead limit each person's total borrowing to $500 — with a single finance charge and no repeated charges. Gone would be auto title loans: if you can't repay, lenders can't grab your car. (Workers often lose their jobs when they lose their wheels, a "death spiral" that spreads personal and financial chaos.)
A couple of months after the CFPB published its proposed rules, TheHill.com reported financial industry blowback. According to The Hill, a credit reporting agency warns these rules would cut the number of payday loans by 70%. A global consulting firm catering to the financial industry predicts the new rules would reduce "payday loan revenues of small lenders" by 82%.
In a related piece, The Hill parroted bankers' ridicule that the US Postal Service could provide basic financial services. It spewed lies by omission: "the fiscally unsteady US Postal Service... a federal agency in financial trouble... trying to salvage a floundering operation... [in] a federal agency, which has lost billions of taxpayer dollars over the years." The report never mentioned the Postal Service's $1.4 billion operating profit last year alone, or that the USPS's "financial trouble" was fabricated by Congress. "Trouble" refers to a ludicrous 75-year pension and healthcare pre-funding requirement to cover workers who haven't yet been born — a fact The Hill conveniently omitted.
Meanwhile, The Hill's selective reporting on the proposed CFPB rules left readers wondering whether these rules exemplify government overreach, unduly burdening lenders.
Truth is, payday predators take billions a year from paycheck-to-paycheck families. Retired folks struggling to survive on a pittance of Social Security also get snared. Lenders have been running their debt traps for years. Interest rates (effective APR) on payday loans average about 400%. Some loans end up costing borrowers 1,000% a year — 10 times the amount they borrowed. Even the Bible speaks out against such excesses.
Under the CFPB's new rules, borrowers would first have to show they could cover their basic living expenses while repaying loans. Lenders could skip "means testing" and instead limit each person's total borrowing to $500 — with a single finance charge and no repeated charges. Gone would be auto title loans: if you can't repay, lenders can't grab your car. (Workers often lose their jobs when they lose their wheels, a "death spiral" that spreads personal and financial chaos.)
A couple of months after the CFPB published its proposed rules, TheHill.com reported financial industry blowback. According to The Hill, a credit reporting agency warns these rules would cut the number of payday loans by 70%. A global consulting firm catering to the financial industry predicts the new rules would reduce "payday loan revenues of small lenders" by 82%.
In a related piece, The Hill parroted bankers' ridicule that the US Postal Service could provide basic financial services. It spewed lies by omission: "the fiscally unsteady US Postal Service... a federal agency in financial trouble... trying to salvage a floundering operation... [in] a federal agency, which has lost billions of taxpayer dollars over the years." The report never mentioned the Postal Service's $1.4 billion operating profit last year alone, or that the USPS's "financial trouble" was fabricated by Congress. "Trouble" refers to a ludicrous 75-year pension and healthcare pre-funding requirement to cover workers who haven't yet been born — a fact The Hill conveniently omitted.
Meanwhile, The Hill's selective reporting on the proposed CFPB rules left readers wondering whether these rules exemplify government overreach, unduly burdening lenders.
Truth is, payday predators take billions a year from paycheck-to-paycheck families. Retired folks struggling to survive on a pittance of Social Security also get snared. Lenders have been running their debt traps for years. Interest rates (effective APR) on payday loans average about 400%. Some loans end up costing borrowers 1,000% a year — 10 times the amount they borrowed. Even the Bible speaks out against such excesses.
