Chris Talgo, a columnist at Townhall.com did a phenomenal job on his recent column regarding Bernie Sanders and AOC’s Loan Shark Prevention Act. I would say he slam dunked the pair’s “Act” quite nicely. Within the piece, several hard-hitting facts & statistics were used to counter many assertions made by the two in their recent video roll out of the Act.
Bernie was quoted as saying “Under the legislation we are introducing today, we would establish a national usury rate to make sure that no bank or store in America could charge an interest rate higher than 15 percent.” 36% would be a killer for the payday industry, 15% would take down the credit card business and many banks. Socialists…
Chris Talgo wrote that “it is true that some creditors, such as
payday lenders, charge high interest rates. However, these moneylenders are
simply filling a niche (and desired) role in the market. For those who have a
history of not repaying loans (high-risk borrowers), payday lenders are willing
to provide credit. In turn, because it is very likely a large number of these
high-risk borrowers will not repay their loans, payday lenders charge more
interest to mitigate the increased risk they assume. In other words, there’s a
good reason why payday lenders charge higher rates, and it’s not because they
are greedy.”
A 2016 CFSA report was cited that found “Over nine in ten borrowers
agree that payday loans can be a sensible decision when consumers are faced
with unexpected expenses. … Nearly all borrowers (96%) say the payday loans
they have taken out have been useful to them personally, with two-thirds (66%)
saying they have been very useful. … Moreover, borrowers are likely to
recommend payday loans to friends and family (75%) and support allowing other
regulated lenders to offer payday loans (78%).”
Here is another finding that Mr. Talgo shared: According to the Fordham
Journal of Corporate & Financial Law, payday lenders have an average profit
margin of 3.57 percent. To put this in perspective, the average profit margin
is 7.9 percent for all U.S. companies.”
Mr. Talgo pointed out that “aside from the fact they are woefully
wrong on the merits of moneylending, Sanders and Ocasio-Cortez’s bill would do
irreparable damage to the borrowing prospects of those with poor credit scores,
the very constituency they are supposedly trying to help. Ample research shows
payday lenders (and other so-called “usury institutions,” as defined by Sanders
and AOC) have increased household welfare.”
Another hard hitting fact in the column was that “According to a
report by the New York Federal Reserve, “in states with higher payday loan
limits, less educated households and households with uncertain income are less
likely to be denied credit, but are not more likely to miss a debt payment.”
And to add to the slam dunk fest, it was stated that a study titled “Restrictions
on Credit: A Public Policy Analysis of Payday Lending,” found “no
empirical evidence that payday lending leads to more bankruptcy filings, which
casts doubt on the debt trap argument against payday lending.”
Great job Chris Talgo
and thank you for taking up the argument with rock solid numbers. Here is
a link to the column:
https://townhall.com/columnists/christalgo/2019/05/15/aoc-and-bernie-jump-the-shark-with-loan-shark-prevention-act-n2546379
This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers. He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.
