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Lawrence Meyers is the CEO of PDL Capital, which brokers financing, strategic investments, and distressed asset purchases between private equity firms and businesses of all stripes. He was the first U.S. journalist to cover the payday loan sector for The Motley Fool. He is a frequent contributor... More
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Ichabod's Cranium
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Teacher of the Year: The Mystery and Legacy of Edwin Barlow
  • Payday Lenders vs. Government Paternalism 0 comments
    Apr 19, 2009 9:53 PM | about stocks: EZPW, FCFS, CSH, QCCO, DLLR, AEA

    "I am a man of many sins, but [at least] I am not a politician" from the TV series “Deadwood”

    Let’s get one thing clear: A 36% APR rate cap means a 90% revenue cut for payday lenders.  Opponents of the product feign ignorance at this, but it’s a diabolical deception – the Eddie Haskell routine – “Golly, Mrs. Cleaver, I didn’t know that rate cap would put lenders out of business!”

    For some, like the mercenaries and phonies at the (Alleged) Center for Responsible Lending, they push the rate cap because they offer a competing product through the Self-Help Foundation.  This would be the same entity that strong-armed borrowers into exotic mortgages that cratered our economy.  Their aim is dupe the media and public for profit.

    For others, like State Rep. Matt Lundy of Ohio, it’s political grandstanding.   Last year, his morally bankrupt colleagues passed a law with a 28% rate cap.   In order to stay in business, payday lenders chose to operate under another statute.  They had to charge less in fees.  To make up the difference, some lenders provide the loans in the form of a check.  If the customer chooses to cash it there, they pay a fee to cash the check.  Two separate transactions, all perfectly legal, with full disclosures made under all applicable laws. 

    But, see, this isn’t good enough for a two-faced politician like Lundy.  Oh no.  He sees an opportunity to make political hay – to further his own agenda.

    But no matter what the motive is, the danger of this type of legislation goes way beyond the removal of short-term credit options.

    The real danger is government paternalism.   Paternalism is simple to understand:  Deprive individuals of their freedom and responsibility, in order to pursue an agenda directly against the interests of the individuals.

    The result?  Oppression.

    Alarmist rhetoric?  Well, if the government takes something away from you, that you chose to use, that doesn’t harm anyone else, would you call that “liberty”?

    Here’s how the CRL, acting in concert with ideological stormtroopers like Bill Faith of COHHIO, tells the millions of users of payday loans what this rate cap really means:

    “We are going to take away your choice”.
    “We are going to prevent you from using payday loans because we don’t think you are smart enough, sophisticated enough, or can manage your own finances well enough”
    “We will decide who can and cannot get a loan”. 
    “We are going to oppress you”

    And by fighting for that rate cap, and putting payday lenders out of business, they are also saying:

    “You cannot take your family to Disneyland”
    “You cannot get your car fixed”
    “You cannot install that air conditioner to cool your home”
    “You cannot have a magician at your child’s birthday party”
    “You cannot handle free choice, so we shall take it away”

    Well, this is what I have to say in response:

    “You cannot” are not words that this country was founded upon.
    “You cannot” are the words of Oppression.
    “You cannot” are the words of Dehumanization.

    The people of Ohio, and of the United States of America, should throw those repulsive words back in the faces of State Rep. Lundy, Sen. Dick Durbin, Rep. Jackie Speier, Rep. Luis Gutierrez, Angela Martin of OurOregon, Gov. Ted Strickland, the CRL, Bill Faith, and anyone else who purports to speak for you.   Throw these same words back at these cancerous hooligans seeking to strip you of your rights, of your freedom.

    “You cannot take away my right to choose”.

    So, Rep. Lundy, as you prepare your ill-conceived bill to restrict what you yourself have said is legal behavior by Ohio’s lenders, consider this –

    Would you prefer to be thought of as the person who defended the liberty of Ohioans, or as a Fascist who took away their rights to further his own ends?

    And let’s not make any mistake here, sir.  It is to further your own ends  – not those of the people.  They know what they’re doing.  They can make choices on their own.   Leave them alone.  If they want to visit First Cash Financial Services (NASDAQ:FCFS), EZCorp (NASDAQ:EZPW), Cash America (NYSE:CSH), QC Holdings (NASDAQ:QCCO), Dollar Financial (NASDAQ:DLLR), Advance America (NYSE:AEA), then let them.

    Full Disclosure:  At the time of writing, Lawrence Meyers was short EZCORP May 12.5 naked puts; no position in any other stocks mentioned.


     

    Stocks: EZPW, FCFS, CSH, QCCO, DLLR, AEA
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