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Payday Loans and Unintended Consequences

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In 2010, Congress passed and president Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank created the Consumer Financial Protection Bureau and authorized it, among other things, to regulate “payday lending.” Six years later, the CFPB has finally issued new rules proposals pursuant to that power. The proposals are bad news for both lenders and borrowers.

Unless you’re wealthy and isolated from the real world, you’ve probably seen “payday loan” or “cash advance” businesses in your city’s strip malls and storefront districts. A person in a pinch can walk in, prove that he or she receives a paycheck and has a bank account, and receive a short-term, usually unsecured (but not always — some lenders take car titles as collateral) loan.

Because the risks of non-repayment are high — people who need payday lenders probably have no savings and poor credit — the interest rates are high, too. It’s also not unknown for borrowers who INTEND to repay the loan to get on a merry-go-round of just keeping up with interest payments. Some detractors refer to payday lending as “legal loan sharking.” Hold that thought for a moment.

The new CFPB rules would require lenders to do extensive research into borrowers’ finances to make sure that they can repay. They would also limit the “rolling over” of loans to just keep interest charges running, and limit interest rates on longer-term loans.

These rules sound like they’re intended to protect vulnerable consumers, but the road to hell is paved with good intentions. Their real effect would be three-fold:

First, the rules would probably drive some lenders out of business. To the extent that there is competition in the lending market, that competition presumably reduces interest to nearly the minimum profitable rate based on risk. Adding to lenders’ costs and capping their rates could very well make the game not worth the candle.

Secondly, the rules would make it harder for poor people in distress to borrow money. It’s easy to sit in CFPB’s Washington offices and believe that one is imposing financial responsibility on the irresponsible . It’s a good deal harder to forego baby formula or prescription medications for lack of ready cash in an emergency crunch.

Thirdly, the rules would bring back the REAL loan sharks — the kind who charge even higher interest rates and who break bones when they don’t get their money on time — and push the most vulnerable among us into their arms.

Personally, I hope I never need a payday loan. But if I do, I hope the industry is still there to provide it. CFPB’s rules are custom tailored to make that very unlikely. The rules would leave us all poorer and less financially secure.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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Parenting Police and the Gorilla in the Room

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English: Western Lowland Gorilla Gorilla goril...
English: Western Lowland Gorilla Gorilla at Cincinnati Zoo (Photo credit: Wikipedia)

Only bad parents lose track of their kids. Only the negligent, the unqualified, the  suspect arrive at the emergency room — or funeral home — with toddlers in tow. When something inexplicable and terrible happens to a child, it must be Mom and Dad’s fault. That would never happen to OUR kids because WE impart discipline and maintain vigilance, right?

Enter Harambe, the 400-pound gorilla killed by Cincinnati Zoo staff after a toddler escaped adult supervision, vaulted a railing and fell 15 feet into the great ape’s enclosure.

The ire of animal lovers focused on the killing is not unreasonable. Harambe clearly acted in a protective, rather than hostile, way toward the child. Zoo personnel over-reacted … but understandably so.  With a kid’s life seemingly at stake, the possibility of happy endings disappeared the instant the kid took his tumble.

Harambe is dead. The Cincinnati Zoo will survive a bad public relations week with its legal posterior probably fairly well covered. The kid is okay, treated and released. Nobody left to deal with but the parents.

As a father of three (25, 17 and 15) who have never fallen into a gorilla enclosure at the zoo, or for that matter broken so much as a finger, I guess I could play the parental moral superiority card here. But that would be wrong. There but for the grace of God go we all.

Per a Facebook witness account: “the mother was calling for her son. Actually, just prior to him going over, but she couldn’t see him crawling through the bushes! She said ‘He was right here! I took a pic and his hand was in my back pocket and then gone!'”

I’ve played the “put your hand in my pocket so we don’t lose each other” trick myself. What we have here is not negligence or poor parenting, but rather the terrifying “stuff happens” situations every mother and father sweats through night terrors over until the kids reach, oh, 40 years old or so.

As “free range parenting” writer Lenore Skenazy points out at Reason magazine, “smug and angry [are] a heady combination” for those of us who dodge the bullets of weird child injury.

Heady, but unjustified. Stuff DOES happen. We can’t bubble wrap our kids and store them in the closet for their first 18 years, and even if we could it would be a bad idea.

Mourn Harambe, but lay off the toddler’s parents.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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The Libertarian Party Prepares for Its Day in the Sun

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Convention Hall at Orlando's Rosen Centre, before business Friday morning
Convention Hall at Orlando’s Rosen Centre, before business Friday morning

ORLANDO, FL — Orlando’s Rosen Centre may be the most press-heavy location on Earth this Memorial Day weekend. With a ratio of about one credentialed journalist for every five 2016 Libertarian National Convention delegates, it feels like the proverbial 15 minutes of fame are in reach not just for the Libertarian Party but for everyone in it. We’ve made the big-time … for the moment, anyway.

But it’s work. I’ve been here since Thursday and expect to remain until Monday, perhaps Tuesday. Every Libertarian National Convention feels like it ages me five years. This is my sixth.

If you’ve ever followed a national political convention on television or in print media’s color commentary, you might believe it’s a sort of patriotic vacation for the participants.  The pep rallies here are as red, white, blue and loud as any Republican or Democratic event. The days are fueled by Starbucks, the nights  by alcohol (among other substances) with parties running into the next night and even bleeding into morning business sessions.

But ultimately the thousand or so delegates from 49 states and the District of Columbia (yes, 49 — Oregon’s Libertarians chose not to send a delegation for reasons too complex to explain, leading to the convention’s first floor fight only moments after the opening gavel) are here to get things done. Aside from nominating presidential and vice-presidential candidates and electing new officers, they’ll spend hours revising and updating our party’s bylaws and platform. If that sounds boring, well, it can be. Thus the caffeine.

The reward? Satisfaction of a job well done, of course. Renewing friendships that span decades. The belief that we are offering America not just a choice, but a BETTER choice. Expecting that at some point our shout-outs for freedom will be heard instead of disappearing  silently into the vacuum of  America’s moribund political system.

By the time you read this column, we will have nominated our 2016 presidential slate. You may be surprised by the composition of that slate based on what you’ve heard on the news. Our conventions aren’t coronations and sometimes we surprise everyone, including ourselves.

 

Either way, I can confidently state that this election year, as usual, the Libertarian Party will offer America its best chance at national revival and a rebirth of freedom.  Not a tall order given the major parties’ likely slates, true.  Their bad luck is our — and your — good fortune. Pay attention. November is right around the corner.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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