Predatory lending industry’s Christmas tree bill up next week
Don’t you just love it when elected officials get a chance to show their true colors? You know, the moment at which all that stuff about ideology and the “free market” gets cast aside and the cold, hard fact that, for many, “it’s all about the Benjamins” is brought into sharp focus.
It appears that General Assembly observers will be treated to such a moment next week when the high-cost loan industry – i.e. many of the same people that brought you the mortgage meltdown – will be over on Jones Street with the best lobbying team and P.R. campaign that money can buy to support their new “wish list” bill.
Under the proposal, the “consumer finance” industry (i.e. storefront lenders who are already permitted to charge a combination of interest and fees that adds up to 54% APR) would get the go-ahead to jack those rates into triple digits. Conservative estimates place the hit on lower-income North Carolina consumers at an additional $90 million per year.
There are so many reasons that this is a flawed proposal that it’s hard to know where to start, but here are a few.
-The main groups pushing this proposal are two of the nation’s biggest and baddest financial industry actors – Citi and AIG. Although the lobbyists will trot out some mom and pop store owners, these giant corporations dominate the consumer finance industry in North Carolina.
-The N.C. Commissioner of Banks has thoroughly studied this “industry” and decided it’s already quite profitable and undeserving of rate hikes. Indeed, it even made a profit at the peak of the recession – a time when no other financial institutions were making money.
-Interest rates are at all-time lows. Why in the world would it make sense to raise rates at such a time?
-The notion that the industry needs higher rates so that it can lend more money to more people makes no sense. What this is saying is that consumer finance borrowers are already so stressed that they’re having trouble keeping up with their loans at current rates. Raising rates to 100+% sure ain’t gonna help with that. These people don’t need loans – they need better jobs, affordable housing and health care.
There are dozens of other reasons, but the bottom line is this:
This is one of the worst ideas to come down the road this session at the G.A. during a session full of bad ideas. There is no real reason for lawmakers to even consider this kind of nonsense except for their desire to please a big industry with a fat campaign checkbook.
Interestingly and happily, as in years past the debate over small loans does not always break down on partisan lines; some confused D’s support it and many R’s are queasy about it – some in powerful positions. Ultimately, the fate of this proposal seems likely to come down to whether enough Republicans are willing to listen to their consciences rather than the small handful of members in their caucus who are pushing the bill on behalf of the industry.