Tag: Payday Lending

The Inequality Under-Belly of “Sound” Consumer Finance

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By Federal Financial Analytics

In remarks on Tuesday, Karen Petrou will lay out two reasons why post-crisis financial regulation makes America less equal: rules are is aligned with real-world business incentives and capital standards unduly penalize equality-critical lending.  Basing her views on Federal Reserve research, Petrou focuses on the Durbin Amendment, qualified-mortgage standards, small-dollar/short-term lending, and subprime mortgages.  Continue reading “The Inequality Under-Belly of “Sound” Consumer Finance” →

How to Craft a 21st-Century Equality Bank

~ Federal Financial Analytics ~ 6 Comments

By Federal Financial Analytics

Reflecting a lot of questions and commentary, the American Banker last week published an op-ed by Karen Petrou showing how to build the bankers’ banks to solve at least some of our economic-inequality problems.  Many proposals seek to do so via the U.S. Postal Service, but an Equality Bank is at least as powerful and comes only from the private-sector. Continue reading “How to Craft a 21st-Century Equality Bank” →

Profits, Purpose, and Payday Lending

~ Karen Petrou ~ 2 Comments

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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What a Post-Office Bank Can and Can’t Do for Economic Equality

~ Karen Petrou ~ 3 Comments

By Karen Shaw Petrou

Yes, I know – getting the post office into finance when you despair of getting your own mail, not the neighbor’s, is a stretch.  But the economics of small-dollar banking under the post-crisis monetary and regulatory framework force a hard choice:  create an equality-focused utility for otherwise-unbankable customers or consign them to the only financial sector that profits from them:  predatory companies.  Maybe someday fintech will figure out a way to handle huge volumes of small transactions, but some day is far away and un- and under-banked customers are losing income and wealth every day they cannot obtain affordable, sustainable financial services. Continue reading “What a Post-Office Bank Can and Can’t Do for Economic Equality” →

Paternalism, Payday Lending, and the Post Office

~ Karen Petrou ~ 3 Comments

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.
 Continue reading “Paternalism, Payday Lending, and the Post Office” →