When I recently read J.D. Vance's memoir "Hillbilly Elegy," I was struck by comments he made in defense of the much-maligned payday lending industry. After researching the issue a bit, I discovered that I was not the only reader with an interest in payday lending who took note of Vance's position. Joe Colangelo, the Executive Director of Consumers' Research, "the nation's oldest consumer organization, thought enough of Vance's views that he wrote an article for Forbes about them. Since Joe echos my thoughts, I'll let him articulate them for me. It's a lot less work for me to let Joe do the heavy lifting.
For those not familiar with Vance's best seller, it details his rise from poverty in a small Rust Belt town, where he grew up in a mostly dysfunctional working class white family with strong Appalachian ties, through a stint in the Marine Corps, through The Ohio State University and later and Yale Law School (where he became editor of the law review), and eventually to an upper middle-class career. His above-average intelligence certainly helped him along the way, but credit also goes to his iconoclastic grandparents and other mentors on his journey. Vance is hardly an apologist for his "class," and has some searing criticisms for those still "trapped" in poverty, who, Vance contends, could help themselves by breaking some of the self-perpetuated psychological chains that bind them.
Coangelo, however, focused on another aspect of the memoir, one that gives lie to the myth that the poor need government regulation to protect them from oppressors such as payday lenders, who, critics like Liz Warren and Maxine Waters assert, befuddle their victims poverty-fogged brains in order to unwittingly trick and trap them into vicious evergreen cycles of debt-induced servitude. Vance thinks that in his case, payday lenders not only didn't steal his bacon, they actually saved it.
To pay for his studies at The Ohio State University, Vance at one point held three jobs simultaneously, including a position with a state senator named Bob Schuler. Vance recounts that while working for Schuler, the senate considered a bill “that would significantly curb payday-lending practices.” Vance is referring to Ohio’s Sub.H.B. 545, which proposed such regulations as capping loans at $500, requiring a 31-day minimum loan duration, and prohibiting loans that exceed more than 25% of the borrower’s gross salary.
Schuler was one of only four state senators to vote against the bill, which was signed into law by Governor Strickland on June 2, 2008 and became the Short-Term Lender Law. Surely someone from Vance’s impoverished background, who grew up in a community that struggled to make it from paycheck to paycheck, would have resented the senator for voting against the reform. Of all people, Vance would see payday lenders as exploitative leeches, right?
Vance’s own experience in “the shadow economy” gave him a very different perspective. Contrary to elite opinion, “payday lenders could solve important financial problems.” They are useful for people who, like him, are unable get a credit card or conventional loan for various reasons, including what he refers to for himself as “a host of terrible financial decisions (some of which were [his] fault, many of which were not). As a result, he explains, “If I wanted to take a girl out to dinner or needed a book for school and didn’t have money in the bank, I didn’t have many options.” Payday loans filled that credit gap.
On that day, a three-day payday loan, with a few dollars of interest, enabled me to avoid a significant overdraft fee. The legislators debating the merits of payday lending didn’t mention situations like that. The lesson? Powerful people sometimes do things to help people like me without really understanding people like me.
At the time Vance took out this loan, the required minimum loan duration was 14 days. When the Short-Term Lender Law passed, it raised this minimum to 31 days. Typically, consumers pay more in interest, the longer the term of their loan; therefore, requiring a longer minimum can result in overall worse terms for consumers than the three-day loan Vance needed.
Coangelo asserts that Vance's tale is another example of how the unintended consequences of "well-intentioned" regulations can hurt the people they're designed to protect. I'd also assert that it's another example of elite progressive academic frauds and professional bloodsucking politicial shysters who both foster and profit from a sense of perpetual aggrievement in those who keep them in office, cynically exploiting their constituencies in ways that purport to aid, but actually harm, those constituencies. Demagogues have been doing that for thousands of years, so you might have expected that people would have evolved to the point where they would have wised up to the shell game. Fallen human nature being what it has been, is, and always shall be, if you think that way, you'd be progressively and outstandingly wrong.
Well over a decade ago, back in the days before a typical blog's comment box became the exclusive den of spambots, wingnuts, weirdos, thugs, and assorted other freaks in need of serious psychiatric drug therapy, I wrote a post for another blog about the unfairness of the overdraft fee practices of many banks. That post generated a comment from a thirty-something, bandanna-wearing, pistol-packing, Harley-riding, six-foot, single mother from Wisconsin who told me that she used overdrafts as a financing device to get her from paycheck to paycheck, that she knew exactly what it cost her (she was a bookkeeper for a manufacturing plant), that she did not have alternatives and needed those overdrafts, and that if I wanted to treat her and others like her as if they were children, I could do something physically impossible to myself. Needless to say, we became fast friends. If she'd been a Texan, and I hadn't already been married, I might have fallen in love with her.
The point that I think Vance and Coangelo are, and I know I am, attempting to make (I won't vouch for anyone's position other than my own) is that in considering legislation or regulation designed to protect people from alleged "harm," legislators and regulators might be best advised to start first with the assumption that the objects of their attention are adults, and to treat them accordingly. Based on that assumption, they might next make the effort to inquire if those adults want your protection. Sometimes, people simply don't want your "assistance."