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payday lenders.">Big banks complicit with online payday lenders.
payday lenders.">Big banks are providing the funds for online payday lenders. This story from the NYT is not the least bit surprising, not that it makes this article any less disturbing.
While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.
The article indicates that without the backing of the big banks, many of these payday lenders would cease to exist.
A visit with the CFPB
Yesterday I was honored to have the chance to speak to the Advisory Board of the CFPB (Consumer Financial Protection Bureau). Their first meeting ever was in my hometown of St. Louis. I was given only about 2 minutes to speak, so I lashed out against payday lenders and mandatory pre-dispute arbitration clauses.
payday loans">Missouri Supreme Court gives Missouri voters the option to slap a 36% cap on payday loans
payday loans">
payday loans" title="Missouri Supreme Court gives Missouri voters the option to slap a 36% cap on payday loans" />
On Tuesday of this past week (July 31, 2012), the Missouri Supreme Court ruled that a ballot initiative capping the interest rate of small loans at 36% (including payday loans) will appear on the Missouri general ballot this coming November. This court decision is terrific news for the many poor, working-poor and struggling middle class people who have been victimized by predatory lenders throughout Missouri.
I have previously discussed this hotly contested payday loan court case here. The payday loan industry had attacked this ballot initiative on numerous technical grounds, including constitutional issues, but in its July 31, 2012 decision, the Missouri Supreme Court shot down all of the arguments of the industry, holding that the payday initiative will go on the Missouri ballot in November. Here’s the entire opinion of the Court.
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Fighting loan sharks at the Missouri Supreme Court
More than 180,000 Missouri Citizens signed petitions to allow Missourians to vote to put a cap (of 36%) on payday loans and other small consumer loans this coming November. Here is some background information on the ballot initiative. But then the predatory loan industry lawyered up, bringing multiple suits to throw out all of the signatures in an attempt to destroy this ballot initiative.
Today, John Campbell and I traveled to Jefferson City to participate in an afternoon of oral arguments before the packed courtroom of the Missouri Supreme Court. John and I (we both work with The Simon Law Firm in St. Louis) also helped to write an appellate brief on behalf of those who seek to allow Missouri voters to decide this critically important issue this November. There was lively argument before an attentive court on numerous contentious issues drummed up by the predatory loan industry. We expect a ruling from the Missouri Supreme Court within the next month on this issue. It is our hope that the Court will rule that Missouri citizens will have the final say on whether loans that currently run from 300% – 500% will be capped at no more than 36%. This is critically important because these loans are currently dangerous products that trap consumers in long-term debt, and drive many people into foreclosures and bankruptcy. For many decades, Missouri did fine without loan-shark rate interest rates, and it’s time to make things right. Stay tuned.
If you want more detail, all of the appellate briefs can be read at the site of the Missouri Supreme Court.
Treat all those who cheat the public like crooked locksmiths
Here is an MSNBC feature on locksmiths who cheat people who call them in emergencies when they are locked out of their homes. This news piece follows a tried and true formula for creating a good memorable story: It vividly exposes an unscrupulous practice, and then turns the camera on the perpetrators as they try to slink away. To tell the complete story, the producers included the fact that there are honest people in the trade (in this case, honest locksmiths); locksmiths can make a living while giving people a fair shake.
Visit msnbc.com for breaking news, world news, and news about the economy
Why, then, don’t networks treat all of those who lie, cheat and steal with comparable scrutiny? What I have in mind are Wall Street Banks, telecoms, fossil fuel industries, healthcare insurers, the defense industries and other powerful entities who have purchased Congress and then made certain that industry reform is impossible. These industries have driven out competition and/or figured out how to freely feed out of the public trough. They’ve been gouging consumers, directly and indirectly, in ways that make the crooked fees charged by locksmiths look like chump change. Consider this recent article by Matt Taibbi, illustrating how big banks are cheating taxpayers.
Consider also how Barack Obama’s promise of an expanded industry of energy conservation and sustainable energy production would be a centerpiece of his Administration. Though he has done some good things, has also opened up large tracts of Western lands to coal mining and providing much more funding to nuclear and fossil fuel than to green alternatives. This is one of many of Obama’s broken promises– somehow, indefinite warmongering against undefined enemies is somehow much more important that having a sustainable economy back home. And even after “health care reform,” people who had health insurance are struggling mightily to pay uncovered medical bills, many of them tipping over into bankruptcy. Payday lenders run rampant across the country. A few months ago, telecoms almost succeeded in destroying what is left of net neutrality.
These sorts of thing don’t just happen; powerful people are consciously making these terrible decisions, and they (including most of our politicians) are motivated by money, not public service.
I fear that one of the main reasons we are cleaning up these industries is that too many Americans are math challenged — they suffer from innumeracy. And most Americans would flunk a basic test on American civics and history. Foxes run rampant in the American hen house. One would need to spend some serious time thinking about the effects of lack of competition in order to appreciate how much the public is being fleeced, but Americans are highly distracted with TV and other forms of entertainment. Another hurdle is that big media is owned by big companies and serves big industries by selling them commercials. Thus, we don’t see constant aggressive journalism illustrating how the public is being ripped off by many (by no means all) big businesses.
Don’t expect the journalism to get better, especially for the reasons outlined by John Nichols of Free Press. Expect things to get worse, in light of the fact that this week the FCC proposed a new set of rules that would unleash a wave of media consolidation across the country. If the agency’s proposal sounds familiar, that’s because it’s nearly identical to rules the FCC proposed during the Bush administration. This proposal is especially scandalous for the reasons stated here.
An additional hurdle to getting these stories out is to make them simple and memorable stories, but this is quite a challenge. These industries have successfully complexified themselves–it now takes “experts” (including teams of lawyers) to understand how these industries function. Ordinary people don’t have much of a chance of even articulating how and why they are getting ripped off, much less understanding what can be done to fix the problems. Complexity is not an accident–it is a tactic. Consolidating the mass media isn’t simply happening–it is a tactic of big business to maintain control, as are recent attempts to give private businesses the power to shut down internet domains without a court order.
There is no incentive for the mass media to excoriate those behind any of these proposals. There is little to no incentive for big media to descend on those behind these movements as though they were crooked locksmiths. If only.
Lesson learned about rationality, perhaps.
I thought I was different.
I have a well-documented history of being more skeptical than the average person. At this website, for instance, I have vigorously attacked the hypocrisy of all politicians, regardless of party. In the spirit of letting the chips fall and seeking the truth, even if inconvenient, I’ve often taken positions contrary to family, friends and “country.” I tend to not be a joiner.
I have long-agreed with David Hume that “Reason is, and ought only to be the slave of the passions, and can never pretend to any other office than to serve and obey them.” Therefore, I tend to be on-guard regarding runaway emotions. I also agree with Jonathan Haidt’s conclusion that humans function like tiny lawyers attempting to control big emotional-laden elephants upon which they ride.
The observations of Hume and Haidt dovetail well with the findings of Antonio Damasio, who carefully examined rationality. See Descartes’ Error: Emotion, Reason and the Human Brain. Phineas Gage, a 19th century railroad worker who suffered brain damage to his pre-frontal cortex, couldn’t no longer connect emotion to decision-making. He’s what Damasio discerned from the evidence about Gage (and about modern-day people who suffered damage to the pre-frontal cortex): He “could no longer set priorities or make decisions. He had no sense of the relative importance of any situation.” His accident made him “rational.” Damasio further noted that this pure rationality “is helpless to make decisions; it paralyzes us. In fact, he proclaimed that “Rationality” is the way “brain-damaged people make decisions.”
I’ve known all of this for a long time, and I try to stay on guard that when I write that I will keep emotions in check enough that I can be seen as a trusted source of information. That’s why what I’m about to mention is embarrassing and frustrating to me.
Back on April 28, 2011, the night I read the U.S. Supreme Court Case of AT&T v. Concepcion, I became angry at the majority opinion, and I steamed full speed ahead and published an angry post at this blog (since deleted, for the reasons discussed below). I stand by many of the concerns I raised in that post, including the following:
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Visualizing money
In his bestseller, Innumeracy: Mathematical Illiteracy and Its Consequences (1988), John Paulos introduced the term “innumeracy” to refer to “an inability to deal comfortably with the fundamental notions of number and chance.” Paulos bemoaned that innumeracy “plagues far too many otherwise knowledgeable citizens.”
Innumeracy causes many people to struggle with their own personal finances. I’ve personally spoken to people who have taken out payday loans (about which I’ve written quite a bit), who cannot tell me what 10% of $100 is. One problem, discussed extensively by Stanislas Dehaene (The Number Sense: How the Mind Creates Mathematics (revised ed. 2011)) is that human animals are naturally rigged to understand zero, one, two, three and four but on our own we cannot precisely identify or work with greater numbers. To do that, we need an incredible human invention, mathematics, which provides us with an intellectual scaffolding for comparing and manipulating larger numbers. Without a solid grasp of mathematics, humans are left only with vague intuitions about the numerical meaning of the world around them.
How can we help those who are mathematically impaired? Money counselors have often recommend that people stop depending so much on credit cards and operate more on cash. This does two things. First, it keeps you from spending more than you have. Second, it allows you to visualize what you are spending. It causes more pain to hand someone several $20 bills than to swipe a credit card, because you are actually seeing significant amount of cabbage leave your wallet.
I thought of this problem of innumeracy as I viewed an excellent new graphic produced by a website called xkcd.com. The concept is simple, but the execution was excellent and designed to illustrate various salient political issues. The result is an highly detailed image that allows you to see the numbers that are affecting our government and our lives. I invite you to take a few moments (or longer) to visualize thousands, millions and billions of dollars.
Payday Lenders rule in Texas">Payday Lenders rule in Texas
Payday Lenders rule in Texas">Here’s one way that deregulation has worked in Texas:
Large corporations that operate payday lenders, many of them based in Texas, have been steady contributors to Perry’s political campaigns over the last decade, donating upwards of $200,000, according to Texas campaign finance disclosure statements. In 2004, Perry appointed William J. White, a senior executive of one of the nation’s largest payday lending corporations, Cash America International, to a seat on the Texas Finance Commission, which is tasked in part with protecting the state’s consumers. Two years ago, the governor elevated White to the chairmanship of that body.
Americans are moving their money away from banks
Last year I moved my money. I made the move in response to a campaign started by Arianna Huffington at the end of 2009. She urged that we stop supporting big banks (especially too-big-to-fail banks) and start supporting local banks and credit unions. I moved my money to a credit union (I chose Gateway Metro Credit Union), and I’ve never looked back. Credit unions are non-profit; they are service oriented, offering low fees or no fees. My new credit union offered me great customer service. In my city of St. Louis, credit unions offer you the use of each others’ ATMs without fees. When I asked what the minimum balance was for my new checking account, the woman from the credit union said, “There is no minimum balance.” I had been struggling with my bank for 3 weeks to set up an HSA savings account, for which it was going to charge me $25/year. The credit union had the account set up in 15 minutes and is not charging me any fee. The credit union offers online check paying and other account services comparable to those offered by the bank I formerly used. I am much happier doing my banking at a local credit union, especially thanks to the superior customer service.
Bottom line: If you are still keeping your money at a big bank, there are many good reasons for moving it. Think about taking it local, especially to a credit union. It turns out that after some of the big banks starting imposing new fees last month, there has been a mini-stampede away from the big banks and toward credit unions:
The Credit Union National Association (CUNA) reports that a whopping 650,000 Americans have joined credit unions since Sept. 29 — the date that Bank of America announced it would start charging a $5 monthly debit fee, a move it backed down on this week. To put that in perspective, there were only 600,000 new members for credit unions in all of 2010. “These results indicate that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings,” said CUNA President Bill Cheney.
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