That’s why closing storefronts is bad
November 22, 2008 | Nevada, industry, regulation, states | Comments (1)Nevada officials are concerned about unregulated Internet lending:
The proposed rule wouldn’t prohibit payday lenders with licenses in other states from making loans where they have licenses, but it would eliminate the problem of payday lenders in Nevada violating laws in other states, Burns said.
Burns said he often gets complaints from his counterparts in other states but can only suggest officials from the other state take action against payday lenders who violate their laws.
“Doing business in cyberspace means no rules apply,” Burns said.
The solution: Bar Nevada payday lenders from making any loans over the Internet.
And how about keeping storefronts viable and profitable?
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It almost seems as though the Financial Institutions Division feels that new regulations must be passed in every Legislative session in order to feel like they are placing adequate controls on consumer borrowing.
The fee increases proposed are inordinately large at 33%. Mr. Burns explained that these fees more closely represent the cost to regulate the industry, but is then proposing more regulations so that even more resources would need to be used in enforcement. The contention that the fees paid by banks and credit unions have been subsidizing payday lender regulation is an invalid argument for this. The banks and credit unions are competitors (that are exempt from state payday loan laws) and the state should not be increasing fees to non-depositories just to make up for any loss of fees being incurred by bank and credit union mergers and closures.
Furthermore, Commissoner Burns believes that implementing a 7 day hold on issuing another loan to a customer who as already gotten a loan will somehow solve financial problems for payday loan borrowers. This will cause customers who would now take less than the maximum amount available to take the maximum because they can’t come back for seven days to increase the amount of the loan if they need to. Customers will also use other lenders if they want to re-borrow after paying a loan off in less than seven days. In effect, this proposed legislation will only have the effect of limiting borrower options and even encouraging them to borrow more than they might need to. This is the opposite of the stated intention of the regulation.
The online lending ban is the most ambitious part of the proposed regulations, because Mr. Burns is illegally extending his authority to the rest of the nation. It is curious how this new regulation was proposed without previously checking to see if federal laws regarding interstate commerce would be violated. You can be sure the 49 other states would not like being informed that they do not have jurisdiction over business activities being conducted in their state. Instead, they are under the jurisdiction of a state official who believes he is the “new sheriff” of cyberspace.