Smelling blood in the water, the sharks move in

Payday loansWell, that didn’t take long. Sensing with good reason that it’s now open season on struggling families at the North Carolina General Assembly, the predatory “payday lending” industry is already banging on the door on Jones Street seeking to have its parasitic industry (which was banned in the state in 2001) made legal once more in North Carolina. Senators Jerry Tillman and Clark Jenkins filed the bill yesterday and it will be formally introduced in the Senate today.

As we have reported repeatedly in this space over the years, “payday lending” is the pernicious practice of making short-term loans (typically of a week or two in length) to desperate people at effective annual interest rates of several hundred percent. The most common mechanism for making the loans is a practice that would feel familiar to any street corner loan shark — it’s called “deferred presentment.”  In a typical transaction, the consumer writes a check to the payday lender (often post-dated) for, say $400, and then receives $340 in cash immediately. In return, the lender agrees not to deposit the check until the borrower’s next payday.

Of course, in many, many situations, the borrower finds him or herself short of cash again come payday and thus begins a vicious cycle of “rolled over” loans in which the borrower has quickly paid more in interest than he or she ever borrowed in the first place. Historically, payday lenders have located in and around low-income neighborhoods and military communities that are always well-stocked with poorly-paid, unsophisticated borrowers.  

That the payday predators see the current political environment in North Carolina as their big chance  was already forecast a couple of weeks ago when the industry anointed former House Speaker Harold Brubaker its hired gun at the General Assembly.

And, of course, as its typical lobbying shtick, the industry is already trying to anticipate consumer advocate critiques by cynically inserting a provision in the bill that purports to prohibit payday predators from lending to military families. But, of course, to include such language is to admit the inherently exploitative nature of the loans.

The bottom line: It should be an ugly fight. And given the disturbing precedents established in the opening days of the 2013 session, caring and thinking people should not get their hopes up for a positive result.

7 Comments

  1. Doug

    February 14, 2013 at 11:15 am

    First article in this blog I have some agreement with. Bound to happen once in awhile. The unfortunate thing is that these same “struggling families” are also becoming slaves to the government, guess we need to keep competition away from government services…like we do with the lottery that taxes the poor more heavily than the rich.

  2. Rip

    February 14, 2013 at 11:58 am

    Payday lenders are also some of Rep. Patrick McHenry’s (R-NC) biggest contributors….

  3. david esmay

    February 14, 2013 at 1:17 pm

    Slaves to the government, really? Like the Right’s slavish addiction to failed economic policies and the fairy tale that tax cuts for the wealthy and corporations creates jobs and has nothing to do with increased debt and deficits?

  4. Doug

    February 14, 2013 at 2:46 pm

    Tax cuts have typically resulted in higher reciepts by the government, what leads us to debt is spending significantly more than those receipts that were brought in. DC clearly has had a spending and borrowing problem at least since the 1960′s, definitely since we went off the gold standard. This is regardless of the political party up there, all of them have contributed equally to this fallacy that we can keep increasing the benefits on the country’s credit card.

    You need to get of this “tax cuts for the wealthy” soapbox too. All the tax cut bills I have been alive for have included changes to almost all levels of contribution. The Bush cuts cut the lowest rate by 33% for goodness sakes and everyone got at least $600. When the top 10% of our country pays about 70% of the taxes any tax cut is going to benefit them the most….it can’t really benefit the bottom 50% as much since they only pay 2% of the total receipts. If you don’t pay in, you can’t have a tax cut so your mantra is only serving to stoke class warfare.

  5. Jack

    February 14, 2013 at 4:06 pm

    Isn’t there a story about Jesus running the money changers out of town because they were using predatory lending practices?

  6. gregflynn

    February 14, 2013 at 4:47 pm

    And Bush created a deficit where a surplus once stood.

  7. Doug

    February 15, 2013 at 10:03 am

    And Barry tripled down on the deficit…..so your point is?