Those sneaky law-abiders
After a lot of hysteria last year, the General Assembly passed legislation limiting short-term loans. Virginia’s new law limits borrowers to one loan at a time and most (but not all!) people to 10 loans per year by setting up a tracking database in the SCC.
It should come as no surprise the new law actually increases the cost of loans. It should come as no surprise the new law is confusing to many, especially borrowers. What is a surprise are the reactions of those who championed these new restrictions. Facing a higher cost of business and customers confused by the complexity, lenders have changed to a cheaper and simpler process.
If you were getting a loan, wouldn’t you want lower costs and down-to-earth terms? Poor Jeff Schapiro at the Richmond Times Dispatch is having a hissy-fit because payday lenders and short-term loan offices are . . . (drumroll) . . . obeying the law.
Schapiro quotes State Sen. A. Donald McEachin (D-Henrico), “I no longer believe they are people of good will trying to work with the legislature” who claims “It shows a great deal of bad faith on their part.” McEachin said he expects legislation further restricting lenders in the General Assembly session that begins Jan. 14.
This is double-talk for ‘I can get a lot more political mileage out of this by demonizing them, and probably squeeze some juice out of the industry too’. That is what the fuss is all about: money, and not the loaned money.
Mark Brooks outlined some of the cash benefits —to our legislators— that the payday lending chaos produced. Schapiro claims the short-term loan industry barfed up $4 million for our law-makers last year.
We should also remember ( Brooks and Schapiro sure forgot) the details about these “evil predatory lenders”, who victimize innocent firms like Visa, Mastercard, Discover, BB&T, etc. . Cash advances on credit cards are at rates up to and over 200%, but ‘that is different’. If a friend loans you $50, and you pay him $52 next week, that is over 600% interest rate!
Then these poor Visa, Mastercard, Discover, BB&T, etc businesses had to bribe ‘incentivize’ our General Assembly to be protected protect Virginia consumers, so they doubled their already generous lobby dollars contributions to our democratic process.
Let’s get realistic. If somebody needs —or very much wants— a short-term loan, they will get one. It is in everyone’s interest to keep the process aboveboard, legal, and as accountable as possible. Squeezing an industry (especially a demand driven industry) into the shadows is not healthy to consumers or the Commonwealth.
But there is big money for the McEachins of our state to make, so expect the cycle to continue until the industry is tapped out and regulated to death. And expect more Jeff Schapiro columns along with his leftist sob-sisters expressing shock —shock I tell you— at what everyone knew.
January 3rd, 2009 at 1:59 am
Hey Jim,
I have enjoyed reading your writings before, and wanted to let you know that I am not done writing about the loan/credit card problems, especially here in Virginia.
The thing that brought this up for me was that I am getting ready to release an updated report for this year, showing where the payday lending company money goes, and I ran across Mr. Schapiro’s article.
The article of mine that you cite is a year old, so I have been going over the figures for 2008, in anticipation of the General Assembly session coming up in a few weeks. The article I posted today was also about Schapiro and his article.
I agree that credit cards are also a problem, and I guess I didn’t articulate well enough my concerns about the situation.
The General Assembly did thrash about a year ago, and the hypocrisy was palpable. From the data we know that Dick Saslaw took over $28,000 in donations from payday lending companies, as an example. Saslaw was and is in a position to route bills and provide influence over what bills get heard, etc. But you already know about all that.
The general theme here is that legislators shouldn’t take money from industries they will or possibly will regulate. If it wasn’t lending, it would be trash, or highways, or any number of things. All the complaints about whether payday lenders should exist, or whether as a lender of last resort they take advantage of their customers, pale next to the huge problem of legislators lining their pockets with contributions. It is truly a free-for-all in the Commonwealth, and a problem that needs to be addressed.
The way I read it, Mr Schapiro was decrying the fact that the SCC approved open-ended loans, prohibited under the new law, just before the new law took effect. Your writing is confusing in some places, because it seems to conflate companies like Advance America with more traditional financial institutions. Absolutely companies like Visa and Mastercard have their interests, and I will be reporting on them as well. But “… lenders have changed to a cheaper and simpler process.” sounds a lot like you are saying that they are all owned by established banking companies, and I don’t know that to be the truth.
BB&T is a bank, so they should not be lumped with Visa and Mastercard, unless you are talking about a BB&T Mastercard.
Senator McEachin, to my knowledge, hasn’t taken any money from payday lenders. You can see that at the link you provided in your article. Accusing the Senator of standing around with his hand out waiting for money from these companies is intellectually dishonest, because you know no such thing.
Let me ask you this: Are you saying that companies that issue credit cards are responsible for the ‘crackdown’ on payday lenders? That they doubled their donations in the face of laws that would deflect interest in their practices, to be focused on the companies that own payday lending companies? I’ll have to look into that, and it is an interesting premise. I am not sure we will ever be able to tell which of their money was donated to influence that process, or for other reasons entirely.
I have been called a lot of things in my life, but “leftist sob sister” isn’t one of them. I am not leftist, whatever that means, and i don’t sob, unless the Denver Broncos lose. You can imagine my constant sobbing this year as they stunk up the joint.
Your epithets are mild, but still troublesome. Let’s see if we can’t work together as citizens of Virginia to make it a better place to live and do business, for the BB&T’s, the Advance America’s, and the Jims and Marks along the way too.
Feel free to email me with your thoughts, and thanks for the forum to speak out about these issues.
January 4th, 2009 at 5:54 pm
[...] Jim Patrick of Shenandoah wrote an article, decrying… something. I am not really sure what. I think his message was, that if this is legal, then what’s the problem? My response to him is over there. [...]
January 5th, 2009 at 12:20 am
Mark writes, “I am not leftist”, yet the only links on your blog are to . . . (drumroll) . . . Democrats and ‘LeftyBlogs’. It is insulting to other readers, much less to me, that you perjure yourself so blatantly. You are a leftist.
And yes, you apparently miss the core point that none of our Virginia politicians have any real solutions, but are more than willing to use the payday loan industry to either get contributions or (like McEachin) simply use it as a platform.
January 8th, 2009 at 12:40 pm
Jim, please decide if you are talking to me indirectly or directly. You have used both in your sentence above.
As far as my blogroll goes, since I frequently am the target of rightist angst, I have removed the previous listed blogs that were of that persuasion. I am however, returning Jim Bacon, as well as Bearing Drift, since they apparently can discuss issues without the invective. I don’t always agree with Republicans, but if they are willing to have a decent conversation, without name calling or snooty replies, I am all for it.
I regularly converse with so-called ‘rightists’ in my own neighborhood, who, since we all have to live together here, recognize the benefit to having a real discussion, not one full of partisanship.
You should try it some time. You sound like Wilford Brimley.
As to the core point, the entire interest for me in writing these articles and publishing numbers, is to awaken people to the fact that something needs to change. I invite you to look at the article on my blog that talks about the 365% open-ended payday loans that are totally unregulated, and don’t really serve anyone.
There’s your invitation.