It's not often you see anyone defending predatory payday lenders, but John Berlau does just that in an Aug. 12 Newsmax column.
Such a questionable defense is apparently the only way Berlau could find to attack Consumer Financial Protection Bureau nominee. Richard Cordray. Berlau declared Cordray, the former Ohio attorney general, to be a "paternalistic politico" whose "philosophy was ban first, ask questions later." The example of this supposed behavior Berlau cited was payday loans, which he eupemistically described as "small, short-term loans." Berlau -- a former writer for the now-defunct Moonie-owned magazine Insight who now heads the Competitive Enterprise Institute's Center for Investors and Entrepeneurs -- then went into shill mode to whitewash the payday loan industry:
First, something about the economics about short-term loans, also known as payday loans or cash advances. Typically, lenders will charge $15 per $100 borrowed for a period of two weeks.
Often, misplaced outrage is expressed that that interest is more than 300 percent when measured as an annual percentage rate (APR). But this is an ill-fitting measure, because very few customers take a year to pay these loans off.
Frequently, unexpected circumstances like a car breaking down or the need for travel hits folks who are low on cash at the moment but can pay back their loan in full in two to four weeks.
Berlau seemed to blame Cordray for the payday loan interest cap instituted in Ohio; in fact, it was a ballot initiative that passed with a whopping 63 percent of the vote. Berlau did directly blame Cordray for closing a loophole that allowed payday lenders to substitute other fees to replace the exhorbitant interest charges:
But others found ways to utilize the state laws governing small lender that specifically allowed lenders to charge processing fees. The fees ended up being comparable to the old rates of interest. As explained by PaydayLoanIndustryBlog, “when a payday loan was transacted [previously] . . . a loan customer paid $575 to receive $500 in cash.”
But after the old laws were utilized in the wake of the interest cap, “with the check cashing fees added, customers pay the same $575 to walk out the door with $500 in cash”
Instead of taking this as evidence that the fees for small loans were never that excessive in the first place, he called for the Ohio legislature to pass new laws so lenders wouldn’t “continue gouging consumers through exorbitant fees.”
The individual’s lack of responsibility for his or her own circumstances has been a theme of Cordray’s regulatory enforcement endeavors. As attorney general, he tried to strong-arm banks that service mortgages and mortgage investors into reducing loan principal and interest for borrowers, even when no lender wrongdoing was found.
Berlau seems to be saying that payday loan lenders have every right to take their customers for every penny they can get away with. That's not exactly building the good kind of loyalty, is it?