Delaney: Predatory Practices

Jun 2, 2015

I love my home in Vermont, but I travel quite a bit and it’s always fascinating for me, even fun, to discover the many things elsewhere that we Vermonters are not, or don’t do. Here’s one of the latest from my recent travels - and it’s a whopper.

Payday loans are euphemistically called high interest lending. But historically it’s called usury, and all of it ’s predatory.

The concept and practice are simple. If someone has bad credit or no credit at all and needs a quick cash fix, there’s no problem. All they have to do is stop by their neighborhood Check’N Go – yes, that’s a real place - sign on the dotted line and out the door they go with cash in hand. Never mind the exorbitant interest rates and increased indebtedness.

In New Mexico, one $100 loan came with a finance charge of $1000; a $200 loan with a finance charge of more than $2000. The Native Community Finance Agency was able to get a woman’s loan reduced from more than a thousand percent to 15 percent. And the state’s attorney general has several cases pending against lenders that charge rates up to 1000 percent.

Some form of payday lending is permitted in some 35 states where lobbyists are active in the state legislatures and make campaign contributions. These same lobbyists claim they provide money to those who can’t otherwise borrow and that they also provide jobs.

The good news is, and I’m not surprised, that payday lending or high interest lending practices and products are illegal in Vermont.

In fact, in the recent legislative session, measures were taken to cap predatory lending in Vermont's rent-to-buy businesses. Limits have been set on what the industry can charge for common household goods to no more than twice the cash value of a product. The new law requires strict disclosure so consumers know what they’re getting into. And, it regulates collection practices so that consumers can’t be harassed if they fall behind with a payment.

Outlawing these practices in Vermont is a modest achievement on the scale of high human endeavor, but it reassures me once again that this little state has a very sharp edge on class, as in classy, and on values.

Suffice it to say that if you want to make big profits on those who can afford it the least, Vermont is not the place to do it.