How The United States if Fighting Predatory Lending
Added: September 29, 2006
Most people agree that predatory lending is a problem, both for society and for individuals. The United States is fighting predatory lending in several ways and on several levels. Of course there is disagreement among lawmakers and politicians as to whether predatory lending is a state problem, a local problem or a federal problem. There are actually efforts being made in fighting predatory lending at all levels of government, so perhaps the answer is that it is a problem for all levels of government and all of the people.
As an example of how the United States if fighting predatory lending, many state legislatures have introduced bills to regulate and restrict payday loan companies. Many lawmakers see payday loan companies as prime culprits in predatory lending and believe that these businesses are unethical and immoral. Other lawmakers set the morality aside and simply say that they create situations that lend themselves to hardships on the part of individuals and in some cases even lead to crime. If a person is unable to repay a loan and that person feels desperate he or she may turn to illegal activities to try to earn the money to pay back the loan. These illegal activities can be theft, drug dealing, prostitution, writing bad checks, or many other things that harm the individuals and of course harm society. Payday loan combines offer an easy fix, a quick solution to a money problem that really is not a solution and in fact creates a bigger problem down the road.
The same thing is really true for auto title loan companies, also called auto pawn shops. These companies hold car titles as collateral and when a person is unable to pay a loan, with excessive interest, then they loose their cars. This then creates a poor person who still owes money and no longer has a car to use to find work and go to a job. This person is then restricted to public transit and must take work found on the bus route, adhering to those hours of employment which offers great restrictions and leads to more poverty. The vicious cycle can go on for generations.
Pawn shops also allow people who are desperate a way to find a quick fix for their problem which gives them larger problems later. Items they pawn could be family heirlooms or other items of value that they could wind up loosing, or need to replace later at higher prices. Some people who are desperate turn to theft and then pawn the stolen items, leading them to prosecution, conviction and jail, or fines that increase the poverty level.
Again many states are considering laws that lower the amount of interest that can be charged by pawn shops, auto title loan companies and by payday loan companies. These restrictions sometimes also include limits on the amount of late fees that can be charged and on the action that can be taken for collection. Of course the payday loan companies, pawn shops and auto title loan companies complain that this is a conspiracy on the part of the banks, which frequently make overdraft protection available which many people use simply as a short term loan, paying it back along with high fees charged. With that in mind, some legislatures in some states are also looking at the banking industry. Some are asking them to regulate themselves and make these fees more reasonable in order to avoid government interference. Others simply want to pass laws now that would restrict the fees they can charge. Both sides make valid points in their arguments. Something will be done in most states very soon.
Law enforcement is also involved in fighting the traditional loan sharks that are usually thought of as part of organized crime. The United States is fighting the predatory lending practices of criminal gangs through tough enforcement by local police agencies, by state agencies and by federal groups like the FBI, DEA, ATF, US Marshals service, the Treasury Department, Secret Service and others. On state levels there is often a department of public safety, a highway patrol or another state police organization that coordinates with county sheriffs and local police departments and targets criminal gangs. The gangs involved in loan sharking are also commonly involved in murder, prostitution, drug dealing, kidnapping, and fraud activities. Through clamping down on all of these offenses, criminals are put away and there is less loan sharking activity, leading to a safer environment for all.
Many people in government are also encouraging education departments, school systems, colleges and universities to mount education programs to teach people the dangers of predatory lending practices to make fewer victims through education of the population. These methods of fighting predatory lending are great long term solutions. If the potential victims are educated and know the potential dangers then fewer people will fall prey to these predators and there will be fewer crimes and fewer victims.
Fighting predatory lending is the business of all levels of government, all police agencies and of course of all of the people. In a society where the government is made up of the people, by the people and for the people, then the people benefit from laws that restrict predatory lending and everyone should join in the fight.