General Assembly Post-Game Wrap-Up/Pre-Game Show: Thurs., April 5, 2012
A glimpse inside the Delaware Way, and what it has wrought. Helene Keeley’s legislation seeking to reign in predatory lending in the form of payday loans, made it out of committee. But not before one of Delaware’s most malevolent lobbyists got an interest rate cap stripped from proposed legislation. Which, of course, wasn’t enough for him. From today’s News-Journal story:
Speaking for the Online Lenders Alliance, a payday-lending trade group, lobbyist Dave Swayze said efforts to curtail short-term lending fly in the face of Delaware’s landmark Financial Center Development Act, the 1981 law that eliminated the state’s usury statutes and allowed banks to charge unlimited interest rates. “We will let the marketplace, we will let the buyer and seller, the contract entered into by them, determine the terms of the loan,” he said.
Ah, yes, the ‘landmark’ Financial Center Development Act. Swayze was present at the creation, working for Gov. Pete DuPont at the time. The legislation that legalized usury. We must not despoil that hallowed ground, no matter how many desperate people fall prey to predatory lending practices in its name.
Along with several other legislators, Rep. Keeley has been trying to address the problem, yes, problem of predatory lending for years. It may not be the Mafia breaking legs any more, but it might as well be. And with the (wait for it) ilk of David Swayze spouting his perfumed persiflage for the industry, they even have their own consigliere. Sickening.
But not so sickening that I can’t continue.
Legislation creating a license for ‘craft distilleries’ passed the Senate and heads to the House. Truly legislation I can drink to.
Before we proceed to today’s Pre-Game Show, a couple of media updates from Leg Hall. The Senate has begun live-streaming its sessions, and you can access the stream at this site. The House Democratic Caucus is into that Twitter thingy, so if you’re even more of a political junky than I am, you can follow the tweets here. Would it be a cheap shot to urge those following The Twitter to let me know where John Atkins is celebrating Happy Hour so that I can stay as far away as humanly possible? It would be, so I won’t.
Only two bills on the Senate agenda today, as the Honorables presumably want to get an early start on their Easter recess. Of note is SB 186(Peterson), which would expand the restrictions against motor vehicle parking in residential districts to trailers that are not attached to a motor vehicle. The bill also limits the parking of non-oversized motor vehicles with trailers to locations immediately adjacent to the owner’s residence. All of the bill’s sponsors hail from New Castle County, so it will be interesting to see if there is any opposition from downstate. Since the bill requires a 2/3 majority, some compromise might be needed if any opposition surfaces.
While the House agenda features nine bills, I’m gonna go out on a limb and predict that they won’t work all nine. For the third (or fourth) time, legislation linking graffiti offenses to loss of driving privileges tops the agenda. No amendment has yet to be filed, but I wouldn’t be surprised to see that they’re working on one, perhaps to exempt travel to and from work from the ban on driving.
HB 277(Heffernan) creates the new crime of ‘home invasion’, presumably because the dozens upon dozens of crimes to which this can be added are not sufficient. Don’t believe me? Read the bill, and just check out that list. A real good election year bill that will just add one more offense to the many for which perpetrators can already be charged. Which may or may not make it a good bill. But I defy any legislator to vote against it. You see how easy it is to demagogue pointless legislation, no matter how pointless it is? Let me just say that I don’t believe that any suspect is at risk of being ‘undercharged’ should this bill not pass. I’ll start ducking now.
HB 191(J. Johnson) requires all commercial vehicles operated in the State of Delaware to be equipped with an audible reverse warning signal that adequately places an individual within 50 feet of such vehicle on notice that such commercial vehicle intends to and/or is in the process of reversing. I see nothing wrong with that.
I’ve discussed a couple of the other bills on the House agenda, and it should be an interesting session for as long as it goes.
As, I hope, was this article. It’s over. Well, not quite:
[youtube]http://www.youtube.com/watch?v=LMc263klrMQ[/youtube]
Thanks, Roy. Now, it’s over.
HB289–another quote about how the industry is so great, helping those who have one unexpected financial problem. They fail to note that 94% of subsequent payday loans are taken out less than a month after the prior one was paid off.
We need this bill to document the extent of the problem, and to create a path to end it. Note that MD, PA, and NJ have outlawed payday loans.
I’d like to see the state drive those payday loan operators out of business by offering low-interest payday loans from the state, provided the borrower enters financial counseling designed to improve their financial situation and how to keep themselves out of the clutches of those bastards.
Puck, I like that idea a lot. Didn’t Jack Markell push financial counseling a lot when he was Treasurer?
Yes, and Mike Castle too. But my impression was that mostly, the “counseling” seemed to consist of teaching people how to read the fine print that screws them. As if that were the problem.
‘pushing’ financial counseling doesn’t matter much if it is not adequately funded.
puck’s idea for a state payday loans program (funded) would help many more delawareans than some other expenditures (did I say fisker?)
The state loan thing, apart from its own merits, would be another incentive to bring people in to connect them with counseling and services before they are completely down and out.
Effective financial counseling would consist of a qualified person sticking with you to find out why you are so damn broke, and the know-how to fix it if they can.
The ideal counselor would be a life coach, but also an advocate who would investigate if your employer was breaking any laws that resulted in lower pay, help you find a better job, call your debtors to work down payments, advise on bankruptcy options, make sure you are maxing out on any Federal or state benefits you are eligible for, help you keep your house or find less expensive housing,find cheaper options for your expenses, get you back into training and/or school, and more. I don’t see financial counselors doing any of those things.
It’s a lot of support to provide, but I suspect cheaper than not providing it.
Elect Puck!
And Keeley ought to withdraw her bill. With the interest rate cap removed, it appears that this legislation does more to benefit the lenders than it does to protect the borrowers.
“The ideal counselor would be a life coach, but also an advocate who would investigate if your employer was breaking any laws that resulted in lower pay, help you find a better job, call your debtors to work down payments, advise on bankruptcy options, make sure you are maxing out on any Federal or state benefits you are eligible for, help you keep your house or find less expensive housing,find cheaper options for your expenses, get you back into training and/or school, and more.”
So pretty much, an adult almost like a parent?
The question is should something like that be an on-going service? Or should the educational system (including especially the adult education system) provide that knowledge?
You know – teach a man to fish…
I would rather educate people to do for themselves than doing it for them. Some interim measure that gets them jump started perhaps. But let’s face it, some of these programs become enduring pieces of the landscape and create a significant amount of dependency that becomes hostage to budgetary and political vagaries. Knowledge, critical thinking, and analytical skills can all be learned. Perhaps creating an environment for that learning would be more effective means of halting the cycle. Such a credentialed program could even be made a condition of obtaining a better home loan or auto loan rate or gain access to financial instruments that are the norm rather than payday loans.
“The question is should something like that be an on-going service? Or should the educational system (including especially the adult education system) provide that knowledge?”
Yes.
MW writes “it appears that this legislation does more to benefit the lenders than it does to protect the borrowers.”
i agree that initially it can help the lenders a bit. However, I am hopeful that the data that it requires be collected and shared will enable policy makers to understand the full scope of the situation, and to design (well) a better path. I think that without this data, we won’t be able to make this happen. I consider this the first step, and a necessary one.
The Pennsylvania treasurer has such a state payday loan program. See http://www.patreasury.gov/betterchoice.html
Thanks so much, Jefferson. Paging Chip Flowers…
Now THAT would be a good way for Chip to get himself noticed.
Dave Swayze Said I used a cannon to kill a flea with senate bill 7 in the property rights battle, I told him I did not want to miss! Go Representative Keeley
Ed Osborne
West End Neighborhood House has a model microlending program that includes financial counseling. The repayment rate is pretty phenominal too, i think better than 95% ontime. Interest rates are low too. Other nonprofits could be doing this too.
Unfortunately, given the Cash Management Policy Board’s conservatism it is hard to see such a program being implemented by the Delaware treasurer.
Oh, good Fing Christ.
Chip Flowers needs to go away and learn from his smackdown. I don’t trust him in the least. That’s one job I’d vote for a Republican to hold.
The state? The state should offer financial counseling to people while selling them casinos and lottery tickets, and trying to build marijuana dispensaries?
Because every time we build another part of our economy on promoting people’s weaknesses, we bet against their strengths. And we reap what we sow.
Education and options need to go hand and hand with this kind of legislative effort. While any steps to hinder the unregulated predators is more than necessary, there will be little change for the thousands of families using payday loans as their only financial option in crisis without awareness to products and programs such as West End’s Loans Plus. This safe, affordable alternative to payday lending offers the opportunity to build name brand credit through a partnership with M & T Bank, a fixed 9.99% APR, a budget review, professional financial coaching, and a three month repayment term. While we hear the default rate of payday loan customers is high, West End’s program experience an amazing 2% default rate on over $77,000 in loans last year. This program works and needs the state’s support to grow and expand, including marketing. Kudos to M & T Bank (formerly Wilmington Trust) and the United Way of Delaware for seeing the need, caring about the community, and providing the support that West End needs to make a difference in this fight against keeping families in debt/poverty. Until others step up and create additional options for lending and asset building, thousands are at the mercy of the predators without any where else to turn.
I attended the hearing and the payday loan lobbyists revealed data we could not get. First they claim a 2% default rate. This is interesting since they have argued excessive interest rates are needed to offset high risks and bad loans. They also revealed an average customer takes 9 1/2 loans per year. This does not support their short term loan argument. Monthly payees would have a loan on average of 9 plus months. The spokesperson said their COMPANY only charges a modest 20 % per month. A 15 per hour borrower only grosses 600 per week and would have extreme hardship paying off their $500 LOAN. After 9 payments on a $500 loan they would have paid $900 in interest and still owe the original $500 .
Interesting. This thread is a textbook example of the genesis of bad legislation.
It’s got everything from the classic “the peasants are too stupid to take care of themselves” to the irresistible “let’s waste other people’s money because the public treasury is an endless pool of riches” and, of course, the ever-popular “government should take over this portion of the private sector because these evil capitalists are ripping people off!”
Good work! Hopefully our long-term plan for the complete marriage of State and Economy will soon come to fruition. Carry on, comrade busybodies!
Yep. Except for the fact that government created the payday loan industry by legalizing usury. Or at least took it away from the Mob and made it ‘respectable’.
And lobbyist David Swayze’s biggest argument against at least controlling this usury is that it goes against the tenets of Delaware’s Financial Center Development Act. Which legalized the usury, and is the reason why virtually everyone is in debt up to their eyeballs.
Questioning usury has been going on for centuries. Other busy bodies who
have publicly spoke out on excessive lending practices .
Plato ,Plutarch Aristotle and Shakespeare to name a few.
The Delaware usury boondoggle is knocked far and wide in progressive circles. It was good for us. Biden’s favorable vote on that single issue made him a most-hated target on the national liberal blogs as the 2008 election ramped up and he took the national spotlight.
I recall a Delaware bill (around 2009) that would have banned any new payday loan business locations. Markell quickly squashed it with a lame compromise. Don’t remember the deets.
This thread is an example of progressives and liberals discussing how the most unregulated and fastest growing component of our financial services marketplace should operate.
While HB 289 is designed for short term loans, we shouldn’t pretend that’s how payday lenders see it. Here is how an industry executive describes the business model of payday lending: Dan Feehan, CEO of Cash America said: “And the theory in the business is you’ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that’s really where the profitability is.”
Presently, the “profitability” of the payday lending industry drives low-income and middle-income families into a cycle of debt and despair because payday lending in Delaware is hardly regulated.
Rep. Keeley’s bill is an example of “peasants” waking up and standing up to fight predatory lending unleashed by more powerful financial/political forces. Delawareans just want to know how pervasive predatory lending actually is in our state… thus the database. Once they get the data, hopefully our duly elected representatives in state government will be able to make adjustments to the law. Good times.
One should also keep in mind this bill requires no fiscal note. So, the weak talking point of “let’s waste other people’s money because the public treasury is an endless pool of riches” doesn’t even apply here.
“Good work! Hopefully our long-term plan for the complete marriage of State and Economy will soon come to fruition. Carry on, comrade busybodies!”
Finally, a troll says something that makes sense. Well done, comrade!
“One should also keep in mind this bill requires no fiscal note. So, the weak talking point of ‘let’s waste other people’s money because the public treasury is an endless pool of riches’ doesn’t even apply here.”
Read the suggestions prior to that comment. Everything from state employees tasked with offering financial advice to complete takeover of the short-term loan business by government. You think that comes without a price tag?
Don’t want to pay high interest? Don’t take the loan. Go to a charitable organization or church that will offer no/low-interest monetary assistance or other forms of aid to help get through that tough spot.
Individuals are responsible for their actions and the contracts they enter into. The appropriate legal recourse for those “[driven] into a cycle of debt and despair” is to file for bankruptcy.
“Good work! Hopefully our long-term plan for the complete marriage of State and Economy will soon come to fruition. Carry on, comrade busybodies!”
Finally, a troll says something that makes sense. Well done, comrade!
Three huzzahs for the collective!
Already done. Get with the program.
“Everything from state employees tasked with offering financial advice…”
You might disapprove, but I think this happens already. Perhaps you think constituent service is a socialist evil, but I don’t think you’ll find many elected officials who agree — not for long, anyway.
When Evil Overlord writes, “The appropriate legal recourse for those “[driven] into a cycle of debt and despair” is to file for bankruptcy.” It looks like he’s internalized the conclusions from the Center for Responsible Lending’s own research. Their data shows half of payday borrowers end their cycle of repeat loans by default.
And it get’s better, as Overlord obviously knows:
• Borrowers who are *approved* for a payday loan, as opposed to those who are denied a payday loan, are almost 90% more likely to file for bankruptcy.
• Payday borrowers are more likely to become delinquent on their credit cards than similarly-situated people who do not use payday loans.
• In addition, households with access to payday loans are more likely to pay other bills late, delay medical care and prescription drug purchases.
• Use of payday lending actually increases overdraft fees and many borrowers lose their bank accounts due to excessive overdrafts.
The market signals sent by payday lending are clear. Payday lending as a financial product is not a short term loan at all; it’s bad for consumers; and it’s bad for the economy. The negative externalities payday lending unleashes on the local economy and on our torn social safety net are well documented.
In fact, had Overlord attended the hearing, he would have heard and seen the evidence that there are thousands of cases clogging up the DE courts each year due to payday lending gone bad.
“The negative externalities blah blah blah”
We shall do away with all the ills in the world by the magic of legislation! Huzzah for laws that coerce the peasants into doing as we, their betters, know they should! Huzzah for benevolent prohibitionism!