Recently the Trump administration reversed a rule put into place under Consumer Financial Protection Bureau (CFPB) that had protected vulnerable borrowers from amassing untenable debts from payday loans companies. The CFPB, for whom we can thank Sen. Elizabeth Warren (D-MA), was created to protect all consumers from the predatory business practices of Wall Street banks, credit card companies, and payday loan businesses that have been known to charge annual interest rates upwards of 700% or more! Al Capone is rolling in his grave over that one.
While I personally believe these predatory businesses should not be allowed to exist, I’m not calling for their elimination. Still, something must be done about these outrageous interest rates they are able to charge the most vulnerable among us. Who do you suppose use these services the most? The working poor specifically and the black communities generally, that’s who! Why should these hard working Americans, who sometimes work two (and even three) jobs trying to make ends meet be forced into these never-ending cycles of high-interest payday loans? I cannot imagine anyone (outside payday loan owners) who can possibly defend an APR of up to 700% just because the people borrowing the money might possibly have bad credit. So, what amount of interest is acceptable?
There are a few choices here. First, we can call upon every elected official, from city councils on up to Congress, to do what the states of Oregon and Colorado have already done; to pass a law that caps the interest rates these predatory companies can charge. However, the state of Oregon failed in stopping these predatory borrowers from rolling over their loans up to two times, meaning those who can least afford these massively high interests rate payday loans end up repaying the same fees all over again, only to continue borrowing money they had already borrowed. So, if Illinois were to go this route, these companies must not be allowed to roll over these loans. Clearly, allowing them to do this, even if the interest rate was capped at 36%, would allow them to undermine that provision in the law.
Second, there is a bill in Congress supported by Sens. Warren, Bernie Sanders, and other leading progressive voices that would allow the U.S. Post Office to reintroduce limited forms of banking, like paycheck cashing and small loans with super-low interest rates. According to the Office of the Inspector General to the Post Office, nearly 25% of all American households (about 68 million families) do not have a checking or savings account and thus are unable to access the banking systems much safer loaning. These families collectively end up spending about $90 billion per year in fees and interest to these predatory payday loan sharks, each averaging $2,412 per year — nearly as much as they may spend on food per year. Every community has a post office nearby, so going back to having them facilitate banking services would make sense.
Third, I refer back to my campaign promise, during my run for the county board, about the need and eventual creation of county and state public banks. The very existence of a public bank has the potential to help us rid ourselves of these unnecessary predatory payday loan businesses in our county and state. Whatever direction we end up going is a step in the correct direction. Clearly, this is but a piece of the overall economic puzzle. But as long as there are people who are already struggling to make ends meet, the least we can do as a community is keep these predatory practices from fleecing those folks even more. So, now is the time for you, the reader, to email or call every elected official you know, telling them that even though some people may make the bad choice to go to one of these predatory payday loan sharks, we shouldn’t be giving these businesses the right to take advantage of them in their time of need. Let us all do the right thing, and stop these predatory businesses from taking advantage of vulnerable people.