Free Speech Tv Ring of Fire Featuring Howard Nations - Payday lenders a tax on the poor

FARRON COUSINS: Welcome back to Ring of Fire. I’m Farron Cousins in for Mike Papantonio this week. The payday lending industry has emerged as one of the biggest scams in America, preying on both the poor and the young. Joining me now to talk about the payday lending scams and why nothing is being done about the problem is Attorney Howard Nations. Howard, thank you for joining me today. HOWARD NATIONS: Morning Farron. COUSINS: So this payday lending industry, you know, we see them on street corners but what exactly is it? What are they doing in this country? NATIONS: This is another classic case of predatory lenders often backed by predatory politicians who are taking advantage of the poorest among us. This whole payday loan scam is a system by which they loan money to the poorest at rates of 300 percent to 700 percent interest. And the catch to it is that they never get off the hook. 75 percent of the people who have those loans in a survey were shown to make 10 loans in a 12-month period on average. And the problem is that the Pew survey said the people are so desperate that 37 percent of them say that they will pay any rate. COUSINS: So it’s cyclical. They get these people hooked on these loans, you, know, maybe they need $200.00 - $300.00 to go get some car repairs but the interest rates are so high the payments are so high that it keeps them coming back because they can’t make the payments and then go and pay medical bills so they have to take out another loan. Is that what’s happening? NATIONS: That’s what’s happening and this has been addressed by legislators around the country as far as the payday loans are concerned, but every time they address it, the industry finds a way around it. For example, they have a long-term loan they call the installment loan which replaces the short term payday loan. The installment loan is 398 percent interest. Line of credit, 299 percent interest. Auto titles, where you pledge the title of to your car against the loan, 300 interest. And we see the effect of that it’s easy to toss out numbers like that but we saw the real effect of it when the Attorney General of New Mexico in 2007 sued 2 of the predators. They had shifted payday to long-term loans so cash loans now was charging an annual rate of believe this 1147 percent interest. So you borrow a $50.00 loan and you’d have to repay $600.00 within a year. COUSINS: And these are people who don’t necessarily have that $600.00 that’s why they have to go get a $50.00 loan. And especially at a time like this, when you have minimum wage that’s been stagnant for years and years and years, people can’t find work, working more than one job these predatory lenders like this, and as you point out, backed by predatory politicians have just boomed in recent years in spite of efforts from some states to crack down on them. I understand Texas is pretty bad with it as well aren’t they. NATIONS: Well Texas is bad with it, which is not particularly surprising. Texas does have a payday loan statute but one of the ways that they found around it in Texas was they use debt-consolidation – which is a fraud, debt consolidation loans. So the debt consolidation loans in Texas, they now have 3500 of those operating in Texas and what happened in Texas is they came in and they passed the payday loan act, which put limits on it. So then the lenders came in and partnered with the banks, which are federally regulated, and they can exceed state interest caps. And then that was cracked down on by the Feds so they started this credit repair organization scam. They now have 3500 of those operating in Texas and they fought off all efforts in the legislature to cap the fees. COUSINS: So whenever someone cracks down on them in one area, they simply rebrand themselves or latch onto another industry that maybe has lighter regulations and when the regulations come in there, they just move on again. So, you know, the states, it seems like it, and the Federal Government to a small extent, they’re trying to do something about it but they haven’t been successful. Is there anybody out there who’s gotten it right? NATIONS: The place that’s gotten it right is the state of Arkansas. First they passed a 17 percent cap through the legislature. The predatory lenders came in and found a way around that but then the Supreme Court of Arkansas found that their new practices were also usurious, so the state of Arkansas is the safest place in the country for lending to the poor. COUSINS: That is unbelievable. And I understand, Ohio and New Hampshire have both attempted to do something about it. What’s happening in Ohio? NATIONS: Well, the difficulty in trying to accomplish anything is shown really well in Ohio. In 2008, they banned high interest rate loans. Then the companies spent $20 million dollars going to the public trying to achieve a rollback of that legislation. They lost by 2 to 1. So you would think ok, Ohio passed that, the public is backing the legislature on this, but yet today in 2013, there are hundreds of companies operating that are making 700 percent interest rate loans because they’ve redone their lending scheme as debt-consolidation or as credit-repair. Another good example is you say is New Hampshire, where in 2008, they banned these payday loans. And then in 2012, they tried to get it passed to allow them to be instituted again, the governor of the state, acting in the best interest of the citizens, vetoed the bill. So then they passed an “allow” to allow installment loans at a 400 percent interest rate. The governor vetoed this auto title loan and yet they went back and a super majority of the legislature, the best politicians money can buy, passed it over the veto of the governor. So even when you have a politician like the governor of New Hampshire, or you’ve got someone like in New Mexico, you have the Attorney General trying to do the right thing. They can’t accomplish it because there’s too many ways that they have of getting around it. It cries out for a Federal regulation but of course, the possibility of getting Federal regulation on this is virtually nonexistent. And I think the nature to the extent of the problem was best shown in New Mexico, where the court actually found in New Mexico, that these 2 lending agencies were following predatory practices and they found that there were $20 million dollars owed in restitution to their customers. What happened was Cash Loans has appealed that and Fast Bucks, the other company, filed bankruptcy. So this is a very difficult problem and I think it cries out for Federal legislation because the local governments simply cannot handle this problem. COUSINS: Well I know the Consumer Financial Protection Bureau has been put into place and their whole role is, you know, “We’re trying to rein in all this Wall Street, this banker greed.” Are they involved with these payday lenders in any way or are they trying to clamp down on them? What’s happening with the CFPD? NATIONS: Well what the CFPD can do is it’s very limited. It can address predatory practices but it cannot cap interest rates. So you know, the CFPD, from the beginning, the bureau had trouble getting past the Republicans in Congress but when they finally did get it through, it’s pretty limited in what they can accomplish in this field. So what we have today is, we have the Federal Reserve loaning money to banks at 1 percent who in turn, loan it to the upper 1 percent, upper 2 percent richest people in America at very, very, very low interest rates that while at the same time, the predatory lenders in conjunction with the predatory politicians are continuing to loan money at just outrageous interest rates to the people among us who can afford them the least. COUSINS: It’s absolutely despicable. And again, like you just pointed out, these people can afford them the least. These companies prey on that and unfortunately, with the Republicans that we have in power today, they’re more than happy to keep people working for minimum wage. Corporations like Wal-Mart and McDonalds are more than happy to keep people at minimum wage so it perpetuates this cycle that keeps these payday lenders alive. We constantly have this impoverished, you know, class in America and that’s exactly what they want. This is the America that they’ve been longing for for years. NATIONS: It definitely is and so predatory practices proceed to pace and there’s nothing on the horizon unfortunately. Absolutely nothing on the horizon that we see that’s going to change it. One thing that did some good is in Texas, the cities San Antonio, Austin, and Dallas actually passed city ordinances that did not allow these predatory practices in their cities. And what they did is they limited the number of loans you could receive in a year to five. The industry came in and complained that they’ve cut our profits by 90 percent. But then they go to this state, and they’ll find a way in the state of Texas, to get that overturned and to have the state legislature override the local practices. Because Texas truly has since 1994, the very finest we’re the best in everything and we have the best legislature money can buy. COUSINS: Well it really sounds like we’re not going to see much action from the Federal Government and it is a state effort but just real quick, we’ve got about a minute left, in your opinion with all these Republican-controlled state legislatures, I believe it’s somewhere between 20 and 30, that are solidly Republican, solid Republican Governor, do you think that any of them out there would be willing to take up this issue, that’s again, perpetuating this constant improvised class in America? Do you think any of them will address it? NATIONS: None of them will address it because these people contribute huge money to the state legislatures, to gubernatorial races, and it’s very easy on the local level for $20 million dollars, as they tried to spin it in Ohio, is nothing; it’s a drop in the bucket to these people. So there’s a lot of money in the industry, there are a lot of politicians for sale, and that combination is deadly to the victims of these practices. And then there’s the final thing that every single time they find a way to actually stop, or control the payday loans, these people will drop back to a Plan B installment loan, line of credit loan, auto title loans, credit repair you gotta love that one, credit repair agencies that’s what they call themselves, debt consolidation agencies there’s so many ways around it so the only thing it could possibly be done is to look to Arkansas as a model for the rest of the country, but that is simply not going to happen. I see nothing on the horizon that’s going to change this. COUSINS: And I think the only things that’s going put these places in their place is to enact policies that make these payday lenders no longer necessary for the American public; where we don’t have citizens that have to go out and take a $50 dollar loan and pay back $600. We’ve got increased wages, we’ve got to strengthen our unions. That’s the only way we’re going to get rid of these places but Howard, thank you much for joining me today. NATIONS: Ok. Thank you.