Because I live in a city (the unhip part), I actually know people who occasionally use payday lenders. And while the industry is ripe for all kinds of abuse, the people who use these lenders conscientiously (the ones who don't roll over the loan, thus incurring obscene amounts of interest) insist they want that option -- because it's still cheaper than going to the loan sharks.
However, the number of people who do roll over those loans is great enough that the payday lending industry needs to be very tightly regulated. The industry knows that; that's why they pour so much money into campaign coffers. But there's simply no question that the interest rates are usurious and this is exactly the sort of thing Democrats have been fighting to change. Not a good place for "bipartisan" compromise! From the NY Times Dealbook:
Senator Bob Corker, the Tennessee Republican who is playing a crucial role in bipartisan negotiations over financial regulation, pressed to remove a provision from draft legislation that would have empowered federal authorities to crack down on payday lenders, people involved in the talks said. The industry is politically influential in his home state and a significant contributor to his campaigns, records show.
The Senate Banking Committee’s chairman, Christopher J. Dodd, Democrat of Connecticut, proposed legislation in November that would give a new consumer protection agency the power to write and enforce rules governing payday lenders, debt collectors and other financial companies that are not part of banks, Sewell Chan reports in The New York Times.
Late last month, Mr. Corker pressed Mr. Dodd to scale back substantially the power that the consumer protection agency would have over such companies, according to three people involved in the talks.
Mr. Dodd went along, these people said, in an effort to reach a bipartisan deal with Mr. Corker after talks had broken down between Democrats and the committee’s top Republican, Senator Richard C. Shelby of Alabama. The individuals, both Democrats and Republicans, spoke on condition of anonymity because they were not authorized to discuss the negotiations.
Under the proposal agreed to by Mr. Dodd and Mr. Corker, the new consumer agency could write rules for nonbank financial companies like payday lenders. It could enforce such rules against nonbank mortgage companies, mainly loan originators or servicers, but it would have to petition a body of regulators for authority over payday lenders and other nonbank financial companies.
Consumer advocates said that writing rules without the inherent power to enforce them would leave the agency toothless.
