When the predatory payday loan industry’s revenue model succeeds — that is, when the industry successfully traps vulnerable low-income people in perpetual economic servitude — it’s not just evil. It’s bad for the economy.
People struggling to pay onerous charges to the corner McLoan store don’t have money left over to buy stuff from businesses that sell something other than usuriously-priced money. As one study put it: “These high-fee loans end up costing states and local communities in terms of lost revenues as consumers spend less on other goods and services to compensate for the increase in payday debt burden.” Another study (there are many) found “each dollar in interest paid subtracts $1.94 from the economy through reduced household spending while only adding $1.70 to the economy through spending by payday lending establishments.” That is sometimes called “taking rents” from the economy, though I personally prefer the term “skimming.”
Also as I wrote a couple weeks ago, the connection between predatory loans and the Las Vegas evictions crisis is obvious: “Despite tweaking – or attempted tweaking – over several years, Nevada is still considered a friendly, even permissive, state for the payday loan industry, and a Pew study found that nationally, 1 of 10 first-time payday loan store customers were borrowing money to pay for housing.”
Plus did I mention they’re evil?
Nevada is home to a rich bipartisan tradition of looking the other way and/or making lame excuses while barely regulated industries that make lots of campaign contributions fleece poor people. So this Riley/Messerley story about the predatory loan industry’s clout at the Legislature is as unsurprising as it is disheartening. The industry’s purchase of Democrats — among legislators and lobbyists alike — is still a particularly revolting feature though. In this, our Age of Trump, Democrats can’t settle in to the usual Carson City business-as-usual, i.e., business first, bubble. Nevadans have enough to worry about without Democrats giving kid-glove treatment to a destructive industry that takes more from the economy than it adds to it. If truly aggressive steps to rein in payday lenders can not be enacted this year, please, please, please let it be despite Democrats, and not because of them.
Meantime, here’s a thing that is probably not a thing but maybe could be a thing…
SB118, sponsored jointly by Democrats Sen. Aaron Ford and Assemblywoman Irene Bustamante Adams, creates a task force to study “financial security.” For the most part the legislation reads like an innocuous effort to promote financial literacy — a fine goal, if not a sharply consequential one, policy-wise.
But in more or less an echo of an unsuccessful 2015 version of the same measure, the bill calls for “an examination of the financial security of the residents of this state, including, without limitation, the causes, extent and consequences of financial insecurity in this state, with the goal of identifying concrete strategies and recommendations for improving the financial conditions of Nevadans.”
The bill also would charge the task force with reviewing nationwide models designed to “increase … access to banking and other resources,” and make recommendations.
There’s no guarantee that the task force created by the bill would take any of that language literally and seriously — again, the bill appears to be driven mostly by a concern that sometimes young people do stupid shit with credit cards. The bill doesn’t even ask for an appropriation to fund the task force’s work, instead relying on donations. No doubt the predatory loan industry would be happy to finance the task force, provided its area of study is sanitized accordingly.
But I for one would love to see Nevada conduct a candid (and state-funded) “examination of… the causes, extent and consequences of financial insecurity in this state,” especially if it produced recommendations for creating broadly available non-predatory alternatives to the predatory loan industry.
Speaking of which…
The best way to rein in the predatory payday loan industry is same as the best way to tackle education: “raise the minimum wage, enact mandated sick pay, curb flex labor abuses, create affordable but well-paying, quality systems of child and elder care, expand public housing programs, expand public transportation programs, reform a justice system that hits the poor hardest, provide low-income people with financial service alternatives to predatory payday/title loan shops, and help Nevada families refinance student loans. For starters.”