“I am a man of many sins, but [at least] I am not a politician” - from the TV series â€œDeadwoodâ€
Letâ€™s get one thing clear: A 36% APR rate cap means a 90% revenue cut for payday lenders. Opponents of the product feign ignorance at this, but itâ€™s a diabolical deception â€“ the Eddie Haskell routine â€“ â€œGolly, Mrs. Cleaver, I didnâ€™t know that rate cap would put lenders out of business!â€
For some, like the mercenaries and phonies at the (Alleged) Center for Responsible Lending, they push the rate cap because they offer a competing product through the Self-Help Foundation. This would be the same entity that strong-armed borrowers into exotic mortgages that cratered our economy. Their aim is dupe the media and public for profit.
For others, like State Rep. Matt Lundy of Ohio, itâ€™s political grandstanding. Last year, his morally bankrupt colleagues passed a law with a 28% rate cap. In order to stay in business, payday lenders chose to operate under another statute. They had to charge less in fees. To make up the difference, some lenders provide the loans in the form of a check. If the customer chooses to cash it there, they pay a fee to cash the check. Two separate transactions, all perfectly legal, with full disclosures made under all applicable laws.
But, see, this isnâ€™t good enough for a two-faced politician like Lundy. Oh no. He sees an opportunity to make political hay â€“ to further his own agenda.
But no matter what the motive is, the danger of this type of legislation goes way beyond the removal of short-term credit options.
The real danger is government paternalism. Paternalism is simple to understand: Deprive individuals of their freedom and responsibility, in order to pursue an agenda directly against the interests of the individuals.
The result? Oppression.
Alarmist rhetoric? Well, if the government takes something away from you, that you chose to use, that doesnâ€™t harm anyone else, would you call that â€œlibertyâ€?
Hereâ€™s how the CRL, acting in concert with ideological stormtroopers like Bill Faith of COHHIO, tells the millions of users of payday loans what this rate cap really means:
â€œWe are going to take away your choiceâ€.
â€œWe are going to prevent you from using payday loans because we donâ€™t think you are smart enough, sophisticated enough, or can manage your own finances well enoughâ€
â€œWe will decide who can and cannot get a loanâ€.
â€œWe are going to oppress youâ€.
And by fighting for that rate cap, and putting payday lenders out of business, they are also saying:
â€œYou cannot take your family to Disneylandâ€
â€œYou cannot get your car fixedâ€
â€œYou cannot install that air conditioner to cool your homeâ€
â€œYou cannot have a magician at your childâ€™s birthday partyâ€
â€œYou cannot handle free choice, so we shall take it awayâ€
Well, this is what I have to say in response:
â€œYou cannotâ€ are not words that this country was founded upon.
â€œYou cannotâ€ are the words of Oppression.
â€œYou cannotâ€ are the words of Dehumanization.
The people of Ohio, and of the United States of America, should throw those repulsive words back in the faces of State Rep. Lundy, Sen. Dick Durbin, Rep. Jackie Speier, Rep. Luis Gutierrez, Angela Martin of OurOregon, Gov. Ted Strickland, the CRL, Bill Faith, and anyone else who purports to speak for you. Throw these same words back at these cancerous hooligans seeking to strip you of your rights, of your freedom.
â€œYou cannot take away my right to chooseâ€.
So, Rep. Lundy, as you prepare your ill-conceived bill to restrict what you yourself have said is legal behavior by Ohioâ€™s lenders, consider this â€“
Would you prefer to be thought of as the person who defended the liberty of Ohioans, or as a Fascist who took away their rights to further his own ends?
And letâ€™s not make any mistake here, sir. It is to further your own ends â€“ not those of the people. They know what theyâ€™re doing. They can make choices on their own. Leave them alone. If they want to visit First Cash Financial Services (FCFS), EZCorp (EZPW), Cash America (CSH), QC Holdings (QCCO), Dollar Financial (DLLR), Advance America (AEA), then let them.
Full Disclosure: At the time of writing, Lawrence Meyers was short the May 12.5 puts of EZCORP. Lawrence Meyers is a former writer for the Motley Fool, and is President of PDLCapital, a private equity firm (www.pdlcapital.com Â ). This article is only an expression of the authorâ€™s opinion, may contain inaccuracies, and is not a solicitation to buy or sell any security. All readers are advised to consult with a financial advisor prior to making any investment. The author may be contacted at firstname.lastname@example.org Â