Leave Tribal Lenders Alone? Mark Calabria of the Cato Institute jumpstarted a heated debate on payday lending when he suggested New York's Department of Financial Services Superintendent Benjamin Lawsky abandon his crackdown on online tribal lenders. Calabria echoed an opinion expressed in an earlier BankThink from doctoral candidate Jane Daugherty: That the recent court ruling denying these tribes an injunction that would have temporarily stopped Lawsky from regulating them is unlikely to hold up. "Issues of tribal sovereignty have regularly made it before the U.S. Supreme Court for the very reason that state governments have often been hostile to the sovereign rights of tribal governments," he wrote, adding that forcing these lenders out of business unfairly took away a customer's right to choose to do business with them. "Even if these activities did harm consumers doubtful as they were freely entered into the harm would appear quite minor compared to that which has been repeatedly imposed upon the U.S. Native American population." Some readers agreed the crackdown infringed upon tribal sovereignty, while others seconded the notion that driving the tribes out of business would have unintended consequences for consumers. "Eliminating an industry makes good headlines and gives do-gooders a warm fuzzy, but it leaves an entire demographic underserved," one reader wrote. But other commenters felt the initiative would help protect customers in the long run. "The CFPB confirmed earlier this year (once again) that this industry thrives on repeat customers who are caught in the payday loan debt trap of having to take out repeat loans to pay off previous loans," one reader wrote. "The extra scrutiny on this industry will hopefully result in stronger regulation and consumer safeguards, with the ultimate result of fewer people getting sucked into these debt traps."
Policing the Moral Police: Samuel Gregg of the Acton Institute also complained of overreach when he argued regulators should not pressure banks and payments processors to stop doing business with morally questionable companies. "Monitoring fraud and deception is an already immense undertaking on the part of third-party payment processors and banks," he concluded. "Trying to make them into first responders to various social pathologies is, I'd suggest, a step too far." Readers largely championed Gregg's thesis. "Prohibition of products and services demanded by consumers worldwide, does not work," one commenter wrote. "What does succeed is a spectrum of consumer choices in conjunction with full and complete disclosure of all rates and fees." Another reader argued there were serious privacy implications at stake when regulators deputize banks. Noting the recent outrage following revelations of domestic spying by the National Security Agency, this person asked, "Do Americans really understand that their government imposes obligations on every financial institution' to monitor their customers' financial transactions and flow of funds and report suspicious activity' to Fincen?"
In Case You Missed It: American Banker Editor at Large Barb Rehm looked at what Federal Reserve chairman nominee Janet Yellen's ascension means for Fed governor Daniel Tarullo while Betsey Cavendish of the Appleseed Foundation argued the Consumer Financial Protection Bureau's remittance rule is a huge win for migrant workers. "The beauty of the new regulation is that the CFPB has the regulatory authority to adapt to unanticipated circumstances," she wrote. "Yes, there's a cost to companies to comply with the new rule, but the cost of failed transactions has hitherto been borne in silence and pain by consumers."
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