The North Carolina General Assembly outlawed payday lending back in 2005, but many people are worried that it might come back if the CFPB's upcoming payday loan rulemaking is not stringent enough.
The scenario that concerns advocates features a payday lending industry lobbyist who can compel lawmakers to rethink the current prohibition based on the assumption that the CFPB has created a "safe" version of payday lending. "See, even the CFPB says these loans are safe," says a hypothetical spokesperson, "and so we should bring them back to our state."
Subsequent claims made to support that idea might be that a) North Carolina is letting online payday lenders and storefronts along our border take business opportunities that could otherwise be realized by firms in North Carolina and b) the companies that are losing this business are solely made up individuals who qualify as either "moms" and or "pops."
I worry that time may have dulled our collective memory. It has been ten years since a payday loan was made in North Carolina. With that much time, many people may have forgotten about the difficulties faced by many because of those debts. But because of some reporting at the time, there are still testimonials to their pain that are available in print.
The following statements come from "Too Much Month at the End of the Paycheck," a 2004 book published by my employer in conjunction with UNC Chapel Hill's Center for Community Capitalism and the Frank Hawkins Institute of Private Enterprise. The book contained portraits and quotes from borrowers.
"I was behind in my car payment. It was just that one time I didn't have the money. But I never did have the $300 to go on and pay the payday lender, so I kept renewing - just for that one time. Now I know I spent more than $2,000 over a two-year period, just for that one $261 loan."
"Different things were going on. My boss couldn't make payroll. I was drawing unemployment, I had just purchased a house...the AC broke down. I had four payday lenders at a time. I owed $1,200. Now I owe $900. They are harassing my references, my friends about my debt. 'Can you have her contact us? Can you have her call?' I am in a vicious cycle and I don't see a way out."
"I was unemployed and need quick money to pay a bill. I had heard of [former publicly-traded payday loan company], where I could write a postdated check....and go buy it back in two weeks for a small fee. Or what was a small fee back then. I thought, you know, free money. Right now, I'm kind of stuck with them. I've got a check for $300 outstanding and I've been unable to roll it over or buy it back. I think it is a definitely a good service for people, but not for their target audience, people who are short on money. Their rates are so high that it is pretty much impossible not to get in a cycle there."
These are critical voices to remember if the day comes when leaders in the NCGA are tempted to bring back payday lending. Indeed, other voices in other states also need to be heard. Many states have made these loans illegal. In an ideal CFPB rule, the language will contain the provision that states may write stronger rules against these loans or ban them altogether if they so choose. The idea that the CFPB cannot pre-empt a stronger state law is written into the Bureau's mandate, but it would be a mistake to assume that the intent will automatically be realized.