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Millions of Americans need to continue taking out short-term loans in order to make ends meet for their families.

Obama's Plan to Kill the Loan Industry



This month, liberal bureaucrats have continued to prove that they are out of touch with the reality that average Americans are forced to face each day. Those who lean left believe that the purpose of government is to shelter the citizenry from self-inflicted harm. The problem is that, more times than not, their assessments are dead wrong. Case in point: the left's recent assault on the short-term lending industry. Recently, officials from seven states and the District of Columbia sent a letter to the Consumer Financial Protection Bureau, urging the body to tighten the proposed rules related to short-term loans.

Obama's CFPB is mandating more paperwork requirements and bureaucratic red tape

This is consistent with what President Obama's CFPB has been trying to do for years. In June, in response to fears that the high interest rates that come from short-term loans are harming low-income Americans, the CFPB released a 1,300-page Small Dollar Lending Rule proposal. The "Ability to Repay" language in this rule will force short-term lenders to conduct a complicated financial analysis of every single individual that requests a loan -- regardless of whether the loan is for $100 or $5,000. This proposal ignores the fact that, due to the nature of short-term lenders' business model, they already have to "make a reasonable determination" of consumers' ability to repay their loans. After all, if the short term lenders don't receive payment, they hit corporate financial trouble. Despite this, the CFPB is mandating more paperwork requirements and bureaucratic red tape that will hurt both low-income Americans and short-term lenders alike. Short-term lenders already make razor thin profit margins -- in fact, only approximately 15 percent, or $15 for every $100 loaned. By comparison, Apple makes 300 percent profit off every iPhone that it sells.

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Over 12 Million Americans are forced to take out a short term loan every year

And yet, these excess paperwork requirements will dip further into short-term lenders' profit margins, forcing them to hire more employees to keep up with the increased regulations and raise rates on their loans. The unfortunate truth is that this will ultimately lead many of them to go out of business. This means that less and less individuals will be able to receive short-term loans. And that's bad news, because Americans need them now more than ever. The workforce participation rate is currently sitting at 62.8 percent -- the lowest it's been since the Jimmy Carter Administration -- and many Americans don't have any other options to make ends meet for their families. Over 12 million Americans -- approximately 1 out of every 20 adults in this country -- are forced to take out at least one short-term loan out every year. That's a lot of people, and yet the Obama Administration is trying to take this financial lifeline away from all of them. That's right: President Obama's reckless fiscal and monetary policies got us into this economic mess, and now the president plans to legislate away the only recourse that many Americans have to cope with the financial dilemma that he created. Makes sense, right?

Obama's anti-loan crusade

No, it doesn't -- especially considering the fact that short-term loan users have nothing but good things to say about their experiences with the loans. In an effort to pass their proposal, the CFPB undertook a "Tell Your Story" campaign, in which it solicited reviews from thousands of short-term loan users. They thought that they would receive oodles of negative responses, which would help to justify their case against the short-term lending industry. To the Bureau's surprise, the exact opposite occurred. In all, 12,308 -- more than 98 percent -- of the submissions detailed users' positive experiences with their loans. In a last-ditch effort to continue the momentum of their anti-loan crusade, the Bureau tried to shield these results from the public's views -- but a Freedom of Information Act request forced them to publicize the data. "I really enjoyed working with my local payday lending store and I think my story is Important," remarked one short-term loan recipient. "Being able to get a loan for a few hundred dollars was not only easy but it was a necessity. There are no other avenues out there that can lend money like that which are not tied to losing a valuable piece of property or giving up your car entirely. This was a great way to make it work for me." "I used a payday loan and it got me out of a jam," said another user. "When I pulled out a payday loan, I had no idea what I was doing. After sitting down with someone at the store, they helped me every step of the way and made sure I felt comfortable with pulling out the loan. I m so glad they were there to help." Taking out a short-term loan might not be ideal, but in today's stagnant economy, it's all that many can do to get by. If the President and the CFPB want to reduce the number of Americans that use short-term loans, they should finally change the nation's fiscal policies so that this cycle of poverty and dependency is reduced. Until then, however, millions of Americans need to continue taking out short-term loans in order to make ends meet for their families.


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Megan Barth -- Bio and Archives

Articles with Katy Grimes

Megan Barth, is co-chair of RedWave America PAC and The Media Equality Project. She serves as national spokeswoman for MediaEqualizer.com, the leading online watchdog for the intersection of Media, Technology and Government.  .


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