Profits, Purpose, and Payday Lending

By Karen Shaw Petrou

On May 23, the Office of the Comptroller of the Currency (OCC) issued a bulletin allowing national banks into the short-term, small dollar lending often stigmatized as payday lending.  The policy shift is intended to spur regulated banks into a business prone to predatory practice, thus giving vulnerable borrowers a better way to tide them over short-term financial hardships.  Will banks start making short-term, small-dollar loans now that they have the OCC’s blessing?  Not if they can’t find a way to make money. 

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Very, Very Safe Banks and a Very, Very Unequal Economy

By Karen Shaw Petrou

On April 13, federal banking agencies released their plan to require regulatory-capital recognition of the FASB’s new current expected credit loss (CECL) accounting method.  Doesn’t it sound technical, dull, and irrelevant to economic equality?  The integration of capital regulation with CECL is indeed technical and often dull, but it’s absolutely critical to the ability of U.S. banks to make the long-term, higher-risk loans essential for reversing at least some U.S. income and wealth inequality. Continue reading “Very, Very Safe Banks and a Very, Very Unequal Economy”

Paternalism, Payday Lending, and the Post Office

By Karen Shaw Petrou

It is a truth known to all who seek consumer protection from predatory lending that payday lending is a scourge.  However, it is also a truth among business analysts that financial institutions will not willingly go broke. Regulated companies will exit a business which cannot generate profit regardless of unmet demand.  It is also a truth among business analysts that unregulated companies then rise to meet this demand, often undeterred by the social-welfare scruples that underpin the consumer-protection rules.
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