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Don't let lenders duck regulation!

Kathleen Day

TEXT OF COMMENTARY

Kai Ryssdal: After a couple of weeks off for their Easter recess, the House and Senate reconvene this coming Monday. And that's about when we're going to start hearing more about financial reform. The Senate's still trying to work out exactly what its bill is going to say.

Banks and other finance companies have poured millions of dollars into lobbying against reform. Commentator and consumer advocate Kathleen Day says it's time to ignore those guys.


Kathleen Day: After the mortgage meltdown, and the trillions in taxpayer bailouts, it's time to close all the loopholes and stop letting some lenders duck oversight.

For too long, we've let some lenders evade the rules everyone else has to follow. That's just led to a race to the bottom in standards for all lenders.

Take the bad subprime mortgages that sparked the current recession. Banks didn't make the first ones -- finance companies did. Then banks jumped into that market as regulators looked the other way.

Eventually bad products crowded out the good. Why? The bad products seemed to be making money. That is until everyone realized they weren't and taxpayers had to step in.

A loan is a loan is a loan. All lenders should have to follow the same rules, whether they are a payday lender or an auto dealer or a bank.

Take payday loans. Plenty of families on the financial brink take out these loans as a quick fix to a financial emergency, only to end up having to take out one loan after another, getting trapped in a cycle of debt.

A typical payday borrower pays $400 in interest alone on a $300 loan. True to form, banks are now jumping into payday loans. Just today, bank regulators defended this predatory practice as sound. Just like when they said reckless subprime mortgages weren't predatory. And we all know how that's worked out.

Congress banned payday loans to military personnel four years ago. The Pentagon calls them a national security risk. Now the Pentagon is pushing for this new consumer agency to protect the troops from other harmful products.

An independent agency could make payday lenders, car lenders, and anybody else who makes loans play by the same rules and protect all of us, not just the military. That's only fair for the financial well-being of millions of families whose lives include more than just a mortgage.

We've had the bailouts. Now we need the watchdog.

RYSSDAL: Kathleen Day is a spokeswoman for the nonprofit Center for Responsible Lending.

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I don't see what payday loans have to do with the crisis we are in. This is not a "payday loan crisis," it is a payday crisis. Unemployment is fast surpassing 10%, and meanwhile the Congress is being bought and sold by lobbies over non-requiters like payday loans. Last I checked, you need a payday to take out those loans, so at this rate Congress just might solve the problem after all, when no one has a payday to loan against.

Congratulations to Kathleen Day! She did an outstanding job yesterday on NPR's Marketplace. Her segment entitled "Don't let lenders duck regulation!' was one of the best I have ever heard on why the average citizen has a vested interest in the fight for an independent agency.
Her message, especially the bank regulators defense of predatory payday lending, cannot be repeated enough.

Enough of the ideology! We need legislation that protects borrowers from lending practices that are harmful. Keep it simple!

You're neglecting two crucial ingredients in the subprime loan problem: Congress passing laws designed to keep lenders from discriminating based on where the borrower lived, and groups like ACORN using those laws to extort the banks into making the subprime loans to obviously unqualified borrowers. And the current government is both of the same mind as the Congress that passed those regulations, under the influence of massive campaign contributions from those groups, and even more directly connected--ACORN campaigned for, and committed voter fraud for, Obama in the last election. These connections, to say nothing of the last year, make it vanishingly unlikely that this Congress or this administration will willingly do anything that's actually in the public interest.

Of course, Ms. Day places no blame on legislators and other lawmakers who encouraged and passed rules and laws that sought to get people into homes, who had no business taking out home loans in the first place. Yes, banks and other financial institutions were reckless, but they were in many cases complying with some existing law and social policy. Omitting this fact from Ms. Day's argument is clearly erroneous.

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