Conservative lawmakers seriously consider re-legalizing payday lending
Some have described the first few weeks of the 2013 North Carolina General Assembly as a “war on the poor,” but in fairness, this is not really the most accurate description.
“Blitzkrieg” would be more like it. Or maybe “carpet bombing.”
It’s gotten to the point where even hardened Jones Street veterans – politicians and staffers who remember the battles of the 1960’s, journalists who’ve covered every manner of human cruelty and lobbyists who’ve seen the sausage grinding at its late-night, end-of-the-session worst – are standing up, taking notice and shaking their heads (or at least blinking their eyes repeatedly) in shock and awe.
“Wow,” they say, “We knew these guys were ideologues, but we didn’t see this coming this fast!”
The list of passed or soon-to-be passed pieces of regressive legislation designed to punish the poor and would-be poor and enrich corporations and the wealthy is long and growing:
- State unemployment insurance: Slashed.
- Federally-funded unemployment insurance: Cut off.
- A federally-funded expansion of health care for a half-million poor people: Turned down.
- A bevy of regulatory boards designed to protect utility ratepayers and/or the environment: Soon to be gutted and stacked with conservative cronies.
- The state earned income tax credit for low-income working families: Soon to be reduced.
- Tax credits for upper income households: Soon to be extended.
- The state estate tax which is already confined to the wealthiest North Carolinians; Soon to be repealed.
- Plans to expedite fossil fuel exploitation at the potential expense of the environment as well as small landowners and communities: Fast-tracked.
And, amazingly enough, this seems almost certain to be just the beginning. Before too long, legislators will almost certainly launch:
- Tax “reform” that will further shift the responsibility for funding government downward;
- A plan to privatize public education;
- Constitutional amendments to cement property rights at the expense of the common good and eviscerate the right of workers to collectively bargain;
- A plan to disenfranchise thousands of poor, elderly and disabled voters who lack photo identification;
- New and radical attacks on reproductive rights; and
- Legislation to privatize public pension programs.
And even payday lending?
In this long list, however, there is perhaps no issue that better captures the essence of what the 2013 session of the North Carolina General Assembly is all about than payday lending.
As we reported on The Progressive Pulse blog last week in a piece entitled “Smelling blood in the water, the sharks move in”:
“Well, 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 over the years at N.C. Policy Watch, “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.”
Pretty amazing, huh? At the same time, that conservative lawmakers are shredding the social safety net in a state with 9% unemployment (it’s actually much higher in many places) they’re making nice with a predatory industry whose core function is to separate desperate people from their last dimes.
A body has to wonder: just how much do people like Brubaker and his fellow payday lobbyist, former state GOP chair Tom Fetzer command in fees to sell such venomous snake oil? And how much money do conservative lawmakers of both parties (one co-sponsor of the bill is the powerful Senate Rules Committee chair who once fought predatory lending and another is a conservative Democrat) hope to garner in campaign contributions for their efforts? In all cases, it must be a pretty penny.
So what’s next? Is the payday bill a “sure thing” like so many other items in the 2013 conservative blitzkrieg?
The betting here is that it will have a tougher time. Notwithstanding their willingness to eviscerate essential public structures and services with reckless abandon, even extreme right-wing lawmakers are leery of climbing too publicly into bed with usurious loan sharks.
One cynical alternative explanation for the bill is that it will be used to “soften up” the opposition so that the storefront “consumer finance” lenders (maximum interest rates: only 80% or 90%) can swoop in and grab new giveaways from lawmakers. A similar strategy is already underway in the tax policy realm where extremist calls to repeal the state income tax are already being used to make plain old corporate and personal income tax cuts seem like a “compromise.”
Another possibility is that GOP leaders are merely using the industry. In this scenario, introduction of the bill is just a means of extracting campaign contributions. Politicians of both parties have been known to do this in the past.
Both possibilities stink to high heaven of course, but either (or both) is eminently plausible.
But, of course, there is another possibility.
It could be that the people behind the payday lending bill are dead serious and intend to ram it through the General Assembly just as they already have done (and are doing) with so many other destructive measures. It’s hard to imagine they’d be so brazen, but, hey, lawmakers in any number of other states have taken a similar plunge into the sewer. Sometimes when you’re on a roll, you just keep crashing through barriers that once seemed forbidding.
If ever there was a General Assembly up for such a “challenge,” the 2013 version may just be the one.