Thursday, October 23, 2014

Lede, buried: Thom Tillis

Gustave Boulanger, Le Marché aux Esclaves, ca. 1882.
North Carolina's GOP Senate candidate, Thom Tillis, showed up in the New York Times yesterday in a way that deserved a lot more attention than it seems likely to get, in a story about state regulation of personal installment loans, for emergency needs like car repairs or medical bills.

These are a kind of subprime loan offered by companies like the Citigroup unit OneMain Financial:
OneMain, which has 1.3 million customer accounts, offers its borrowers unsecured, installment loans with interest rates of up to 36 percent. Borrowers pay both interest and principal in monthly installments until the loan is paid off, usually within a few years. But many of its borrowers refinance their outstanding balance.
About 60 percent of OneMain’s loans are so-called renewals — a trend one analyst called “default masking” because borrowers may be able to refinance before they run into trouble paying back their current balance.
It looks like a technique for reducing people to quasi-permanent low-grade debt slavery, and it's a problem, but to the bankers and their lobbyists the regulations need to be loosened so they can charge higher interest rates still, and they have succeeded in getting this done in some eight states over the past two years, as in the North Carolina case:
Under the previous law, lenders could charge 30 percent interest on loans up to $1,000 and 18 percent on a remaining balance of $6,500. The new law allows for rates of up to 30 percent on the first $4,000 of a loan and 24 percent on the next $4,000.
That's seriously abusive usury, and the story makes clear that there's no justification for it: the lending institutions were making spectacular profits on the laws as they were.

One population that suffers a lot from this kind of loan operation is our military personnel, who aren't paid enough to support a family, which makes the loans a kind of big thing in, for instance, North Carolina, where eventually the top brass came out to oppose deregulation, in 2011:
Commanders from Fort Bragg, home of the Army’s Special Operations Forces, and Camp Lejeune, the Marine base, rarely come out so publicly to denounce a bill, some lawmakers said. But they made an exception for installment loans. One commander worried that “out-of-control debt” could jeopardize soldiers’ security clearances.
However, state legislators, including Tillis, were unable to hear these pleas, distracted by the clink of cash:
North Carolina lawmakers, meanwhile, collected hundreds of thousands of dollars in campaign donations from the consumer finance industry. Speaker Thom Tillis, who supported the bill in the House, was one of the biggest beneficiaries. Mr. Tillis, a Republican who is running for United States Senate, has received more money from the American Financial Services Association than any other Senate candidate, according to
The role of Tillis is only noted way down at the bottom of the story, as if the Times didn't realize he's a national figure now in the Glorious Battle for the Senate. And then it's not every day that starts off with Ben Bradlee and Oscar de la Renta dying and then moves on to people getting shot dead in the parliament in Ottawa. And stories about credit regulation are pretty much as boring as it gets.

Nevertheless, it's now clear Tillis cares more about bankers than he does about our troops, and that's not even a slight exaggeration. And you can bet that his Democratic opponent Kay Hagan, however depressingly conservative she wants to present herself as being, would never vote for bullshit like that (her record on banking regulation and campaign contributions from banks is not all that beautiful, but it's distinctly better than Tillis's). I hope her campaign picks up on it.

Cross-posted at Booman Tribune.

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