By Phil Kerpen
Attorneys general (AGs) from California and other liberal states – many of which already ban payday loans – sent a nasty letter to the Consumer Financial Protection Bureau (CFPB) Director Kathleen Kraninger last week opposing her proposal to relax the Obama-era rules that would severely restrict the availability of payday, vehicle title, and other small-dollar loans. The liberal AGs promised to sue the CFPB over the issue, and they might even find a sympathetic judge who will find that Obama administration executive actions cannot be reversed by Trump appointees. But that would be an unfortunate outcome for millions of Americans who rely on small-dollar loans as a necessary last resort – and who would end up suffering serious consequences if the Obama rules came into effect.
Obama-appointed CFPB Director Richard Cordray, a protege of Elizabeth Warren, was still on the job in 2017 when the agency issued rules requiring mandatory underwriting for small dollar loans. Underwriting is the process of looking at a borrower's overall financial obligations and ability to repay a loan. Mandatory underwriting for typical payday and other short-term loans would present an enormous administrative burden, add lengthy delays to products that are often used in urgent, emergency circumstances, and create a significant barrier for many borrowers when they lack any other options.
Small dollar lenders are heavily regulated in the states and there are also a dozen federal laws in place, and ongoing CFPB oversight. The Cordray rule is a solution in search of a problem that would have serious negative consequences for the millions of Americans who find their last resort for credit eliminated.
The Democratic AGs are backed by the usual constellation of liberal community organizers and advocacy groups – led by the so-called Center for Responsible Lending, which was founded by Martin Eakes – the inventor of subprime mortgages – and funded by Herb Sandler, whose negative amortization "Pick-a-Pay" home loans were called the "Typhoid Mary of the housing crisis" by the New York Times. Sandler sold his bank to Wachovia for billions before the loans collapsed and blew up Wachovia. Only in the upside-down world of consumer finance advocacy could these people portray themselves as the good guys.
We've all seen heartbreaking stories of people who got caught up in cycles of borrowing and were eventually overwhelmed. But it's important to keep in mind that the availability of small dollar loans is more likely to relieve than to create such stress.
And the lenders are hardly making huge profits. In fact they have been badly battered in recent years by intense competition and rising regulatory compliance costs driving mergers, private equity buyouts, and closures. The two remaining major publicly traded short-term lenders, FirstCash and EZCORP, have profit margins of 8.6 and 2.7 percent, respectively.
U.S. Bank announced with much fanfare an alternative to payday loans, but its product ended up being priced similarly to the payday industry standard $15 per $100 borrowed – in fact, exactly...
By Phil Kerpen
If you "cut the cord" and switch from cable TV to streaming services, you will probably notice that one big difference in price happens because that long section of your bill with taxes and fees is gone completely or dramatically slimmed down. And as more customers go in that direction and competition intensifies on the incumbent franchised cable companies, they are justifiably calling foul on the often outrageous demands local governments place on them that result in more taxes and fees on your bill.
To begin with, there is the maximum 5 percent franchise fee that localities are allowed to charge on cable service under the federal Cable Act. That places cable at a disadvantage versus its video competitors, but it's authorized by law. That 5 percent fee alone delivers over $3 billion a year to local governments.
Unsatisfied with that haul, however, local governments have begun concocting a wide variety of additional taxes, fees, and mandates that go on top of and violate the 5 percent federal cap.
The Federal Communications Commission (FCC) is considering a rule that would close these loopholes and clarify that the 5 percent cap applies to all of the various and sundry cable-related exactions creative local governments have come up with, and would prohibit fees on broadband and other non-cable services as a condition of a cable franchise.
It is a good and necessary proposal and should be made final, before the most abusive local practices spread even further.
An appendix to the cable industry filing with the FCC shows how far things have gone already, including a number of Ohio ordinances requiring a "certificate of registration" with expensive regulatory requirements before a cable operator can offer non-cable services; a requirement in Corvalis, Oregon that requires a special franchise for Wi-Fi deployment; new additional fees for access to public rights-of-way in North Carolina, Kentucky, and New York City; and lengthy lists of communities all over the country demanding free government channels and free cable and Internet service at parks, libraries, government buildings, etc. Many of these concessions may sound desirable – but they are costs that are ultimately borne by cable customers. To the extent free services are desired, they can be demanded but must be counted towards the five percent cap, as the FCC has proposed and the Cable Act requires.
Then there are the taxes. Eugene, Oregon is charging a 7 percent fee on broadband revenues in addition to their existing franchise fee on cable. And after the state Supreme Court ruled in favor of Eugene, some other cities across the state have followed suit with similar fees. Similarly, Los Angeles, California is charging its 5 percent "possessory interest" tax on broadband and phone service. In Texas, cable companies are being charged for right-of-way access twice – once for cable and once for phone – even though their services share a single wire. These taxes/fees violate federal policy against local internet taxes and will only discourage the deployment of...