Last February I wrote about how the Obama Administration’s attack on short-term lenders was out to take away some American’s only access to necessary funds. The Consumer Financial Protection Bureau (CFPB) is a creation of the abomination named Dodd-Frank. The CFPB is the arm of the Obama Administration that has made it their mission to destroy short-term and small-dollar lenders. While they’re at it they are hitting many of the new online lending opportunities that Americans enjoy.
Why would they do this?
Crony capitalism and government overreach of course. The BIG BANKS have the politicians in their pockets and the Big Banks don’t like all the competition. The dumb part is that the Big Banks can’t adequately serve this clientele nearly as well as the new sources of short-term and small-amount loans can. And really, they don’t want to. Big Bank Kings don’t want to mess with the small stuff, but they don’t want anyone else doing it either.
The CFPB is claiming that these short-term and small amount companies are “predatory” and “abusive” because they charge high rates. That’s the pot calling the kettle black. Miss a payment to a big bank and see where your interest rate goes. Way up!
The higher the risk for the lender, the higher the interest rate. It’s common sense, not predatory. Even a liberal should be able to understand this. Sometimes people with horrible credit have emergencies and need money fast. The vast majority of Americans are not prepared to handle an unexpected expense more than $400.
So when someone’s 1998 Camry breaks down, what choice do they have than to borrow the cash to get it fixed? They have to get to work, right? The Obama Administration must really hate poor people. Pushing the CFPB to go after these flourishing American lending institutions is less than American. The CFPB is going after the unique niche of lenders that provide a valuable service to those who need it the most. The guys and gals living paycheck to paycheck.
The CFPB wants those people to be protected from predatory lenders…but what if the people don’t need protection? They need access to cash! No matter what the interest rate.
Here is a great testimony of exactly what I’m talking about. Meet Robert Sherrill. He was a drug dealer. He did his time and began to rebuild his life with the help of short-term loans. Because of his background, no one would take a chance on Robert. The deck was stacked against him. He couldn’t get a job, a loan, or a bank account…so he started his own business. That sounds pretty American, but the Obama Administration is against it.
Today, Robert employs 20 people and is still growing. He is member of the Chamber of Commerce and the Better Business Bureau. It is estimated that there are 51 million American consumers who are unable to use traditional credit solutions found at the Big Banks.
On June 2nd the CFPB reared its ugly head…again. This time they released a proposal called >The Small Dollar Lending Rule. It is similar to previous attempts at regulation, but has some major changes.
The proposal is still incredibly complicated, very detailed which stymies innovation, and the net result will be fewer credit options for the people who need it. At a time when we need markets to be flexible to meet the consumers’ needs, this proposal goes a long way the other way.
The CFPB proposal contains extremely complicated requirements for eligibility as well as unprecedented underwriting standards. Basically, it makes borrowing $400 more difficult than getting a mortgage. No one is saying there shouldn’t be some oversight and rules of the game. The rules just need to be common sense-oriented, not Washington-Politician-oriented.
The rules set out in the Credit Card Act are a great place to start for realistic rules for the small dollar loan companies. Seems simple enough, but nothing in DC is simple or logical, only political.
That could be why their approval rating is so low.