The War Against Payday Lending

by Jonathan Lee

In June of 2016, the Consumer Financial Protection Bureau (CFPB) put forward a proposal to regulate the short-term loan industry. The Small Dollar Lending Rule seeks to “alleviate and solve” for the “apparent weaknesses” of the current rates and short-term lenders by requiring “lenders to assess and verify a borrower’s income, housing costs, and credit and legal obligations.”

The intention of the proposal is to protect low-income families from being caught in an endless cycle where many are “forced to take out another loan to make ends meet.” At first glance, it seems that the rule would solve problems in an industry known for its “dirtiness.” Except policymakers are thinking with their hearts while sitting in their air-conditioned offices, away from the facts and any form of interaction with the real world of short-term loans. Just the fact that they see the short-term loan industry as “dirty” supplies sufficient reason to believe that either these policymakers are ignorantly prejudiced or plainly manipulative.

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