Undermine Payday Lenders with Cash-Grant Poverty Relief

One solution to solving the scourge of payday lending is to pass Initiated Measure 21, the real 36% rate cap, to prevent loan sharks from trapping poor and desperate customers in debt with insurmountable triple-digit interest rates. Another is to enact Senator Bernie Sanders’s plan to authorize the Post Office to offer short-term loans and other banking services.

A third option (and let’s think of these three policies as legs on a stool, not either-or) is to do a better job of fighting the financial distress that impairs decision-making. Economics professor Nathan Fiala says we can combat poverty better by empowering the poor with cash-grant programs like Mexico’s Prospera that don’t impose unnecessary restrictions on their choices:

Researchers have published countless articles on how to address these issues, but we don’t have a clear solution — if it was that easy to solve poverty, it would be over by now. That said, recent solutions do show promise: guaranteed minimum income programs and cash grant programs such as Prospera (formerly Oportunidades) from Mexico, which gives families direct cash payments in exchange for school attendance and health clinic visits.

Currently, much of the United States’ low-income support bureaucratically restricts individual choice. We need a system that gives options back to individuals and gives them the individual power to make good long-term choices for themselves and their families. Research shows that the poor don’t actually waste their money on drugs or alcohol when they receive cash programs. Instead, when given control over their own lives through policies that provide simple cash, such as Prospera, they make good choices. Sometimes it still means a high-interest short-term loan. But it’s far less often [Nathan Fiala, “The Problem Is Bigger than Payday Loans,” Washington Post, 2016.07.01].

Give the poor reasonable options, relieve the financial distress of having to choose between rent and groceries, and the loan sharks lose the desperation that underpins their business model.

7 Responses to Undermine Payday Lenders with Cash-Grant Poverty Relief

  1. Randee Huber

    Fabulous idea.

  2. Randee Huber

    Allowing the post office to issue short term loans is great idea. And what would be wrong with a non-profit that provides grants to people who need help and nowhere to turn? Your old beater car breaks down. You have no money to get it fixed. Now you can’t get to work. So you lose your job. You’re unemployed and have even less money, and no hope of ever getting the car running. No car, no job, no hope. Ah, but what if you applied for a car-repair grant? Problem solved

  3. Non-profits (churches!) offer assistance like that now, but I suspect there are some people who don’t want to take “charity” and somehow convince themselves they’d rather take the strings attached to a payday loan than the sense of obligation to give back to a charity that helps them out in the form of community service.

  4. To start with, no cash bond for non-violent crimes, anything less than a felony, and not involving a motorized vehicle. Its all PR bond. Figure out minimum levels of drug possession that are not chargeable. Maybe anything considered personal use. Lets free up the courts and keep some money in the poors pocket. Then maybe they wont have to worry about committing crimes to pay for their legal woes.

  5. Daleb, I agree that cash bond provisions are part of the problem. The involvement Dan Lederman’s bailbondsmen—former Lederman employee Bradley Thuringer’s anti-IM21 committee and lawsuit, current bailbondsman Mike Napier’s knocking on circulators’ doors, and current bailbondsman and Lederman pal Pat Powers’s continual propaganda against IM21—suggest that the exploitative business models of the bailbondsmen and the payday lenders are intertwined.

  6. Many big names involved in the age old immorality scheme of soaking the poor&petty criminals, addicts, alcoholics & and elderly in nursing homes. Rich bottom feeders.

    You mention ledermann. Any Regents or their spouses in the title/payday loan business w/vested interest to use state government as a personal slot machine or ATM?

    We’ve started to clean up DOE and GOED with Joop & various lawfirms EB5 scams. SDGOP…how can republican crooks keep winning elections? Is murder & mayhem our only wake up call that works?

  7. 785% INTEREST ON PAYDAY LOANS in Puerto rico–$4-5 Bill.

    goldman sachs is behind it. democracynow