Back to serious blogging next year.

Where payday lending isn’t allowed, due to idiocy, there needs to arise payday shopping, where consumers can put off paying for goods until payday, with the seller earning a profit not from interest on the deferred payment but simply on the relatively high mark-up on the goods.

Based on media reports, I’d say possible state fights in Mississippi, Virginia and Kentucky.  On the federal level, of course, the CFPB will become active in July.  Its first priority will be developing new mortgage lending rules, even to the extent of drafting a standard application form.  After that, it will address non-bank products.

The Good:   The focus on bank fees during the Dodd-Frank debate has educated lawmakers, regulators and some in the media about the fee comparisons between payday loans and bank services.   There’s now a discussion about the best way to make short-term loans to working Americans.

The Bad:   During the financial reform debate, our critics got away with lumping payday loans in with financial products that caused the 2008 economic crash.  Three hundred dollar loans do not have a macro economic impact.

The Ugly:   The Montana referendum.

Interest story in today’s Wall Street Journal about Elizabeth Warren reaching out to business:

White House adviser Elizabeth Warren and a top lieutenant are quietly asking business and consumer groups for names of people who might run the new Consumer Financial Protection Bureau, people familiar with the matter said.

The hunt suggests that Ms. Warren, a lightning rod for some bankers, might not be selected to lead the bureau, a centerpiece of the Dodd-Frank financial overhaul bill that passed this summer. Still, many liberal groups will push to get her in the post.

Some lawmakers want another crack at payday and title loans again in Virginia.  And here’s the latest from Kentucky.

From the story:

When it comes to a short term loan like the payday loans, the benefit for the lenders depends on the interest rate. Generally, people don’t take huge amounts as payday loans and hence if the interest rate is not high, then it does not turn out to be a realistically profitable endeavor for the payday loan lenders. When it comes to US, the interests are being capped in many states recently, Montana joining the list as 16^th now. From 1^st of January, 2011, it will become a law in Montana so that lenders won’t be able to charge interest more than 36%.

As a result, payday lenders are leaving the state and finding other places to continue with their business. Many actually left right after November when the Montana voters passed this initiative overwhelmingly. Those who already left include names like Express Loans, B&R Check Holders etc.

When will our critics debate rate caps honestly?

Elizabeth Warren says a CFPB would have prevented the foreclosure crisis.  In an oped that ran last week in the print edition of the Miami Herald but was only just picked up online, she says:

Lost in much of the back-and-forth over wrongful foreclosures is the question of whether the scandal could have been prevented. The answer is yes.

The practices now under investigation took root and grew because there was no single federal regulator with both the responsibility and the tools to look out for consumers.

Had it existed, the new consumer agency could have stopped these problems before they multiplied. Many of the failures already admitted were not sophisticated scams that had been carefully concealed. By enforcing existing laws and involving state authorities early on, the agency could have made sure that the law was respected. No one would need to wonder whether the world of borrowing and lending works only one way: Families have to follow the legal rules, but the rules are optional for big banks.

USA Today has extensive coverage today:

The new agency aims to use high-tech tools and the Internet to help it tackle problems more quickly.

For example, Warren is encouraging consumers to use their digital cameras and phones to scan dubious or suspect financial offerings or products, and e-mail them to the CFPB. That would allow the agency to more quickly respond, keep track of similar problems and see if certain groups of people are being targeted, she says.

The agency will have many more eyes and ears in the wired world, Warren says, and will keep consumers informed. She has already used the White House blog to tell Americans, “If we set it up right from the beginning, the agency can collect and analyze data faster and get on top of problems as they occur, not years later.”

The bureau has overwhelming responsibilities, Calhoun says. It is starting from scratch, and it won’t be able to do everything at once. And with the Republican control of the House, the fear is that too much time will be spent interrogating the consumer bureau, instead of letting it do its work, he says.

One clear message to banks and credit card issuers is that consumers now will have a powerful advocate, says Warren: “The very existence of the agency has sent a strong signal to the credit industry that Americans want a change. And they want someone on their side.”

The Hattiesburg (MS) American decides to tell it:

“We’re regulated just like a bank,” said Dan Robinson, spokesman for Borrow Smart Mississippi. “But naturally the banks don’t want us to be in businesses because we’re costing them a lot of business.”

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“That APR calculation is calculated as if a customer takes out a $100 payday loan every two weeks for the entire year,” said Jamie Fulmer, vice-president of public affairs for Advanced America. “That’s just not how a customer uses our product.”Fulmer says the average consumer will typically take out payday loans up to eight weeks within a year.

The industry is working hard to educate the media and legislators in Mississippi.