Cordray Aims for Fair Payday Lending
The recently appointed director of the Consumer Financial Protections Bureau spent little time resting on his laurels. Not three weeks removed from his controversial recess appointment by President Barrack Obama and Richard Cordray is already on the case, conducting invaluable in-person research on the payday loan industry.
No, the Oxford educated, five-time Jeopardy winning, former Ohio State Attorney General is not sifting through financial reports or crunching loan numbers himself, instead of having his staffers do it. Instead, he’s holding public hearings on payday lenders, and kudos to him for doing so.
While many politicians have opinions on payday loans, I’m sure few – if any – have actually used one. So while it seems like every senator or governor and their well-pampered mother is lambasting payday lenders for their tyrannical practices, millions of Americans continue to borrow from them. So much so, in fact, that the industry has become a $7 billion a year generator. If these loans are such a trap, why do people keep going back?
Saying that consumers are “roped in” or “tricked” is simply insulting to the intelligence of these people who are simply taking one of the few avenues they have left to borrow money. Likewise, it’s unfair to say that all lenders are predators. Just like all lawyers aren’t greedy and all priests aren’t pious. Outlawing these loans that are clearly in demand, is not only unjust to those lenders that are fair and reasonable, its also unfair to the consumers who have no where else to turn, and the millions that take out loans and pay them back in a timely manner.
So, instead of finding an easy solution to a complex problem(Arizona, Arkansas, Connecticut, Georgia, Maine, Maryland, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia, I’mlooking at you!) Cordray is doing what the head of the Consumer Financial Protections Bureau should do, listening to the consumers and finding out what is really going on.
Before the hearing in Birmingham, Alabama – one of the states where cash advance loans are most prevalent – Cordray stated that while emergency and short-term credit is in high demand, it’s important to make sure these products are helping consumers. Bravo Mr. Cordray! Not just for listening to the people who you are supposed to represent, which is surprisingly difficult for some politicians, but for realizing that the solution to the problem is not simply black or white.
During the hearing, all positions on the issue were voiced: a financial analyst from an anti-poverty group spoke about the ‘cycle of debt’ he sees every day with the customers he tries to help; Cordray himself spoke of a man who contacted the agency about a $500 loan he had taken out and had paid $900 towards, but still owed money on; yet, several customers spoke of positive experiences they had with cash advance loans; and some even brandished, “I choose payday advance” stickers.
Not only is the new bureau already on tenuous footing with Congress Republicans, who dragged along their approval of Cordray’s appointment for months in protest of what they believe to be weak oversight, but Obama’s extremely controversial use of the recess appointment ignored the traditional understanding of the tool, and redefined how the practice will be used by presidents to come. Needless to say, both President Obama’s and Cordray’s reputations are on the line, depending on what Cordray makes of his inquiry into the payday loan industry. Though its early, his ‘from the ground up’ approach can only been seen as a positive sign.