Wednesday, February 06, 2013

Annise Parker and payday lending

I have been rough on Madam Mayor for many things, but she gets this one right.

Houston officials laid out proposed restrictions on payday and auto title lenders Tuesday, drawing tepid support from the industry and disappointment from advocates who say the rules would not stop the spiral of debt for many low-income borrowers.

The Texas Legislature discussed regulating payday lending in 2011, but met stiff industry resistance and made little progress. Since then, Dallas, Austin, San Antonio and El Paso have adopted regulations. Dallas and Austin have been sued over their restrictions.

Houston leaders say they will wait to see whether the Legislature acts during its current session before voting on their proposal. Mayor Annise Parker has said the industry "cries out for regulation" and called the state's failure to do so "disgraceful."

Kuff has written extensively about the payday lending topic, including this most recent, so I'll just chime in to say that the Lege is unlikely to take Parker's scolding seriously enough to actually do something about it.That's primarily because these swindle merchants have bought the Austin politicos off. Included among the ranks of legislative loansharks is Houston's very own Gary Elkins, owner of 12 payday lending stores himself.

The usual suspects lead the list of contributions from this unsavory crew and their PACs: Rick Perry ($35,500), Greg Abbott ($58,500), and Speaker Joe Straus ($131,800). And if you wanted to know more about how disgusting these shylocks are, just read about Irving's Trevor Ahlberg; payday lender, Republican contributor, and elephant hunter.

It's also noteworthy that consumer activists aren't completely fond of Houston's effort in this regard.

Consumer groups said the proposal is focused on what the industry could stomach, not what is best for the community.

They prefer the ordinance adopted by Dallas and other cities, which sets lower caps than the Houston proposal on the amount consumers can borrow, allows the plans to be refinanced fewer times, caps the number of installments that can be offered in multiple-payment deals, and requires the principal loan amount to be reduced by 25 percent with each refinancing or, on a multiple-payment deal, with each installment.

But while the mayor got it mostly right, I'm not so sure about her consigliere, David Feldman.

"On the other hand, it needs to be recognized that payday loans are often the only source of credit that these very same consumers have access to. Overly restrictive regulations can reduce the availability of the source of credit for those who need it the most."

Just looking out for the little guy. How thoughtful of the city attorney. Feldman obviously missed the memo regarding the reason payday swindlers have become the lending source of last resort for so many: banks are swimming in cash and don't really want to lend it out to anybody, creditworthy or not. This has been the case since the bank bailout in the fall of 2008, and one of the main reasons the national economy remains sluggish. By the way, you heard that the banks got even more money in undisclosed, unregulated loans from the Fed -- a total of $7.77 trillion -- than they did via TARP ($700 billion) , right? The same goes for community banks as well as the Big Six, of course; they are making more money playing the stock market than they are making loans.

There probably isn't going to be any progress in this regard either, as the banks own all the Congress critters. Obama's appointee-designate for SEC chair, Mary Jo White, was praised by none other than Jamie Dimon as being "a perfect choice" for the job.

Shouldn't that automatically disqualify her?

Update: "So God made a banker".

And on the eighth day God looked down on his planned paradise and said, “I need someone who can flip this for a quick buck.” 

So God made a banker. 

God said, “I need someone who doesn’t grow anything or make anything but who will borrow money from the public at 0% interest and then lend it back to the public at 2% or 5% or 10% and pay himself a bonus for doing so.” 

So God made a banker. 

God said, “I need someone who will take money from the people who work and save, and use that money to create a dotcom bubble and a housing bubble and a stock bubble and an oil bubble and a commodities bubble and a bond bubble and another stock bubble, and then sell it to people in Poughkeepsie and Spokane and Bakersfield, and pay himself another bonus.” 

So God made a banker.


Elderlady said...

Does anybody know, in advance what kind of interest rates these people are allowed to charge?

Maybe some folks can't get bank loans, or don't have credit cards with a huge limit..

But... neither can they afford an interest rate that is worse than "usury". JMHO.

PDiddie said...

"While Texas law technically prevents payday lending, the Texas Legislature has maintained a loophole for predatory lenders that allows them to operate outside the law. Since 2005 most major payday lenders have used this loophole to brazenly ignore Texas usury laws. As a result of this loophole, while the number of states that have banned payday lending continues to grow, in Texas the industry is flourishing.

"Texas-based lenders now charge among the highest interest rates in the nation, with up to 1,150 percent APR routinely charged on payday loans..."

Matt Bramanti said...

Why not open up a similar store and charge a fraction of the rate charged by payday lenders? Maybe a 15 or 20 percent APR would work.

You'd help people you like (low-income folks) and punish people you don't (Straus and his "shylocks," really?) while making a modest profit and proving yourself right.

PDiddie said...

I think that's a worthy idea, Matt, although the greed motive would probably consume the person who begins with a little altruism in their heart.

Not a big fan of the Jesus, as you are already aware, but I certainly agree with him about the money-changers.

Matt Bramanti said...

Moneychangers and moneylenders aren't the same thing, Perry -- try getting a mortgage at IAH.

The condemnation there was in profiting from religion. Jesus also drove out the guys selling doves. Do you really think God condemns pet shops?

But hey, don't worry about the profit motive. You seem to know what the interest rate should be -- so set it at breakeven.

What do you think the annualized default rate is, anyway?