Category: Congress

  • A Criticism on over-reaching politicians

    Recently, I’ve learned that the government is getting involved more deeply in financial regulation. Now, I’m all for leveling the playing field.

    My issue is this, as it pertains to payday loans. They want to install “common sense” rules.

    CRL president Michael Calhoun says that “A 36 percent cap on annual interest for consumer credit is a quick, common-sense way to restore protections that have been severely compromised in the consumer credit market. It would cost taxpayers nothing and plug a $5 billion hole in the wallets of working families.”

    If this stuff is common sense, then why do we need a rule for it? I guess what he’s saying is that all the people that use payday loans do NOT have any common sense?

    I think this is a clear example of economic paternalism.

  • George McGovern on Economic Paternalism

    Payday lending has become big. Now, it’s just a matter of taking sides to see who wins. for the middle 80%, these sides are dictated by the press.

    I came across an interesting post by Fitsnews.com. It centered around an op-ed done by former senator George McGovern. It’s worth reading his biography on Wikipedia, here.

    He takes on mortagages, healthcare and payday loans. What’s interesting about this post is that Senator McGovern’s stance on big government, especially since he is a Democrat and won the presidential nomination in 1972.

    His main point is this “Freedom means responsibility.” He also goes on to say, “The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.”

  • Congress may try and regulate payday loans….out of business

    The House of Representatives are putting together a bill that would effectively cap interest rates at 36%. The AP News reports that several shares of publicly held payday and pawn lenders stock price took a hit for a second straight day. Anecdotally, most of the stock market has been taking a hit, so this news could be completely incidental.

    The truth be told, even if this bill never sees the light of day, the impact this will have on public opinion will be felt.

    I would love to get a clarification on this point. You can still charge 36% interest and product a triple digit APR, if you’re able to charge fees on top of the loan. Payday lenders have claimed from the beginning that their fees are not interest.