Monday, February 9, 2015

Payday Lending vs. CFPB

The Consumer Finance Protection Board, which I am sure you recall was formed in response to the 2008 financial crisis has turned its gaze towards payday lending.

Curious. Borrowers often have to take out new loans to cover interest payments on existing loans. Occasionally, a borrower's profligacy leads to what in other circumstances is called "unpleasant monetary arithmetic." This is when interest payments exceed tax receipts. When this happens to a government, someone has to get stiffed. Often, it's the taxpayer that takes the hit.

I remind you that the borrowing and the interest due is but a symptom. The underlying issue is that borrowers earn too little relative to their expenses. All the CFPB regulation they can muster won't do a thing to remedy the actual problem. All they can do is oblige would-be lenders to accept an otherwise unpleasant BATNA. Which for some people will include repossession, eviction, bankruptcy, or God forbid, turning to organized crime.

Eh, maybe that's the point. Perhaps the CFPB's telos is to punish those wicked citizens who have the temerity to be poor and desperate. If that's the case, this decision makes complete sense. And I'm sure they have all the backing they need from those constituents so blessed by Providence that they never need solicit the aid of strangers.

h/t M-Rizz

1 comment:

  1. Once again they fail to recognize the true problems. Payday lenders are legally licensed and registered. They provide a needed service for people struggling to meet the costs of living. These consumers are hard working people who do not qualify to receive bank loans, credit cards and other forms of financing. Payday lenders and pawn dealer are the only options available to them. The CFPB is wrong to attack the lending industry while the real problem is that working people can't afford to live comfortably and have to use UK payday loan to cover urgent expenses in this sluggish economic environment.


Do you have suggestions on where we could find more examples of this phenomenon?