PAYDAY LOANS: Rolling over into poverty

St. Louis Post-Dispatch/stltoday.com ^ | April 23, 2005 | St. Louis Post-Dispatch Editorial Board

[tahiti]

THE Illinois House last week passed reasonable rules for the payday loan industry. If the Senate follows suit, as it certainly should, some down-on-their-luck Illinoisans should be saved from penury. Payday loan shops provide a needed service - at an outrageous price. They provide small, short-term loans to people who can't get them elsewhere. Most are people shunned by credit card companies because of low income or bad credit history. If your car is broken down, and you need it for work, the payday loan store will provide money to pay the bill. But charges are steep, averaging $20 to $22 for a two-week loan of $100. Some charge even more. But the crunch comes when the time is up and the customer can't pay. Shops are happy to roll the loan over, for another $22, and another, and another.

[tahiti]

Constitution of the State of Illinois

ARTICLE I

BILL OF RIGHTS

SECTION 1. INHERENT AND INALIENABLE RIGHTS All men are by nature free and independent and have certain inherent and inalienable rights among which are life, liberty and the pursuit of happiness. To secure these rights and the protection of property, governments are instituted among men, deriving their just powers from the consent of the governed.

SECTION 15. RIGHT OF EMINENT DOMAIN Private property shall not be taken or damaged for public use without just compensation as provided by law. Such compensation shall be determined by a jury as provided by law.

SECTION 16. EX POST FACTO LAWS AND IMPAIRING CONTRACTS No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed.

SUPREME COURT OF THE UNITED STATES

No. 98—963 JEREMIAH W. (JAY) NIXON, ATTORNEY GENERAL OF MISSOURI, et al., PETITIONERS v. SHRINK MISSOURI GOVERNMENT PAC et al.

[January 24, 2000]

Justice Stevens, concurring.

"therefore, I make one simple point. Money is property;"

Can it be any clearer that this Illinois law is unconstitutonal.

[D.P.Roberts]

Great! Price the service out of reach in the name of making it cheaper. Typical Libthink.

[ikka]

The bill would require loan shops to enter customers' identities into a state-wide database.

Why?

[Texas Eagle]

What does the Constitution have to do with anything?

[Guillermo]

I'll probably get flamed for this...but the payday loans and car title loans are forms of legalized thievery.

Laws to reign these blood sucking leeches in is fine by me.

Now, the next thing that needs to be done is to end all state lotteries.

[Abathar]

""The bill would require loan shops to enter customers' identities into a state-wide database.
Why?""


To keep people from going to 14 loan stores to get around the law that says you have to wait 14 days to get another loan if you roll it over. basically they are trying to protect people who otherwise are just digging themselves deeper every week until they can never get out.

[OneTimeLurker]

How is this any different from any other regulation of the financial services industry such as laws regulating userus loans?

[righttackle44]

The bill would require loan shops to enter customers' identities into a state-wide database.

Why?

I used to work for a small loan company. All loans were entered into a common database through the local lenders'
exchange organization, and, when a customer completed a loan application, the first thing we did was to check with lenders' to see if they had other loans out.

What the database was for was to prevent banks and small loan companies from lending people more money than they could afford to pay back. You could be fined if the state found your company was pyramid lending.

[Atlas Sneezed]

It's not theft if it is consensual between informed parties.

[thoughtomator]

Constitution? You're kidding, right? We don't obey any Constitution. Lip service, yes, obey, no way.

[Guillermo]

I disagree.

[Atlas Sneezed]

Two informed parties want to engage in a transaction that each believes will benefit them.

And our conservative defender of liberty want to make it illegal.

[Guillermo]

It's not beneficial to the borrower in the long run...they'd be better served by learning how to properly budget their money.

Yes, I believe in Liberty, but sometimes (YES) the Gov't has to protect idiots from themselves.

If you don't think the Gov't should ever be in the business of protecting people from themselves, then you should be all for taking out guard rails along wountain roads.

[tahiti]

"We don't obey any Constitution. Lip service, yes, obey, no way."

Here is the good news.

U.S. Constitution, Article I, Section 10,

1. No state shall...pass any bill...law impairing the obligation of contracts,

Amendment V

Nor shall private property be taken for public use without just compensation.

Amendment IX

The enumeration in the Constitution of certain rights, shall not be construed to deny or disparage others (rights) retained by the people.

Amendment XIV

Section 1. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States;

The Illinois law also blatantly and almost contemptuously, violates the U.S. Constitution.

With that being said, consider the following:

U.S. Supreme Court

HAFER v. MELO, 502 U.S. 21 (1991) 502 U.S. 21

Monetary damages under (Federal Law) 42 U.S.C. 1983.

"Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State . . . subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured. . . ."

Justice Sandra Day O’Connor:

We hold that state officials, sued in their individual capacities, are "persons" within the meaning of (Federal Law 42 U.S.C) 1983. The Eleventh Amendment does not bar such suits, nor are state officers absolutely immune from personal liability under 1983 solely by virtue of the "official" nature of their acts.

The judgment of the Court of Appeals is

Affirmed.

[tahiti]

"Laws to reign these blood sucking leeches in is fine by me."

What part of the any state constitution or federal constitution to you support?

You obviously do not support the protection of private property or the granting of special immunities and privileges to certain groups of citizens.

I sure hope you are not one of those "conservatives" who rails on about "activist" judges inserting their personal opinions into the interpretation of the constitution's in spite of the simple and clear meaning of the words in the constitution's.

[tahiti]

"is this any different from any other regulation of the financial services industry such as laws regulating userus loans?"

No and that is the point.

So many regulations enacted at both the state and federal level blatantly and unambigously violate the "takings" clauses of their respective constitutions.

We free citizens need to exert our constitutionally protected rights from the tyrannts.

Benjamin Franklin: “In free governments the rulers are the servants and the people their superiors and sovereigns.”

[Guillermo]

Gov't exists to protect life, liberty and property.

[narses]

Business or usury?

[Tom D.]

I would be a little more sympathetic to the payday lending business if I did not believe that there is a lot of price fixing in the business. If there was no price fixing, the market would cause the "loan rates" to fall to what the market will bear. Instead, there appear to be artificially high rates in this business.

This article provides:
"The trade group representing national payday loan chains has signed on to the legislation. But another group representing smaller players is fighting it. The small fry say they can't survive on the lower fees. The bill's sponsor, Rep. David Miller, D-Dolton, picked the $16 figure by averaging the limits in other states that regulate payday loans. The cap is even lower in Indiana, he notes, but the payday industry is healthy there."

This trade group appears to want what amounts to quasi-state sanctioned price fixing, believing that its members can make sufficient returns at the state mandated maximum and at the same time comply with the additional administrative requirements. If that is the case, then those same members should have logically already been in the state offering these lower rates to increase market share, and not be bothered with the extra administrative costs.

The added administrative costs probably will kill some of the smaller local outfits who can have some hope of knowing their customers well enough to know the risk they are taking when they make these loans and who will use that knowledge to price these loans accordingly. On the other hand, the "officially sanctioned rate" of 16%/fortnight will become the across the board price.

As far as the no more than three rollovers every 45 days goes, it is a fair bet that if these things have not been paid in that time period, the lender is not going to get paid anyway.

One thing this article fails to mention is bankruptcy. Under our bankruptcy laws, most folks who borrow money under these terms will keep everything they have if they file bankruptcy because their bankruptcy exemptions exceed their assets. Furthermore, a bankruptcy will not hurt their credit rating because if their credit was worth a damn, they would not be using this service.

I know that I have rambled on both sides here. I guess that the bottom line is that the folks who make these loans are not above price fixing. Setting a ceiling of 16%/fortnight is not going to do anything of consequence to help the situation. And, if these borrowers get screwed too hard, they have a perfectly good way out through the bankruptcy court that will be reasonably painless.

[freedomfiter2]

1. No state shall...pass any bill...law impairing the obligation of contracts,

So the no fault divorce laws are invalid.