Commentary

Legislature advancing a snake oil bill bought and paid for by a snake oil industry

In case you missed it this morning, today’s Weekly Briefing looks at a remarkably cynical and misrepresented bill that appears to be on its way to final passage at the General Assembly today despite the veto issued by Governor Roy Cooper. The bill will allow the frequently predatory small loan industry to pack the high interest loans they purvey to struggling consumers with more junk insurance — something called “credit property insurance.” What’s more, the folks pushing the bill on Jones Street aren’t even being honest about what the bill would really do.

As is explained in the essay, the chief defender of the bill in the House — Rep. John Szoka — told members last week in debate that the proposal is about allowing people who buy ATV’s and jet skis to insure them against damage. That’s just not true:

In the debate that took place last Thursday, the chief proponent of the override motion, Rep. John Szoka, described credit property insurance as insurance that consumers purchase when they buy big ticket items like all-terrain vehicles and jet skis. Here’s what Szoka said in describing the bill after characterizing it as being about allowing the sale of credit property insurance on types of property not foreseen when the law was last updated in the 1990’s:

“It [the bill] allows a person who is financing the purchase of this property – say at a consumer finance…uh…place or at a small business that sells these and also finances them – it allows them to purchase, uh, this type of insurance.”

This is simply wrong or, at the very least, badly misleading.

Setting aside the fact that there were plenty of ATV’s and jet skis around in the 1990’s, the proposed change is not about insuring people who purchase those kinds of expensive products. Why in the world would anyone go to a consumer finance company that loans money at effective rates of 30, 40 or 50% per year to buy a $10-15,000 ATV or jet ski?

No, the bill is about desperate people who go to loan shops to borrow money to pay their bills – say $3,000 or $4,000 – and then put up their personal property (be it their computer or dining room suite or maybe their muddy, old used ATV) as collateral for the loan.

According to the most recent North Carolina Commissioner of Banks annual report on the state consumer finance industry, there were 438,615 loans made by small loan shops in North Carolina in 2015. Of that amount, only 9,458 or around 2% were in excess of $10,000. The vast majority of loans were for less than $5,000 and more than two-thirds were for less than $3,000.

And, again, remember: any of the handful of credit property insurance claims that ever actually get filed and paid off go toward paying off part of the loan – not making the borrower whole.”

To make the whole thing that much more unsavory, the industry behind the bill donated more than half a million bucks to state politicians and party committees between 2013 and 2016.

The bottom line: As noted in the column, barring some unforeseen development today, “a scamming industry will have prevailed and, much like the borrowers it preys upon, most state lawmakers won’t even know that they’ve done.”

The Senate is scheduled to convene today at 2:00 p.m. and the bill in question is right at the top of the calendar.

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