title: austrian schools evacuated over radioactive rock
text: the war against payday lending apple uses similar tactics with iphone jonathan lee  misesorg  october   comments image credits flickr khrawlings  
  in june of  the consumer financial protection bureau cfpb put forward a proposal to regulate the shortterm loan industry 
  the small dollar lending rule seeks to alleviate and solve for the apparent weaknesses of the current rates and shortterm lenders by requiring lenders to assess and verify a borrowers income housing costs and credit and legal obligations 
  the intention of the proposal is to protect lowincome families from being caught in an endless cycle where many are forced to take out another loan to make ends meet at first glance it seems that the rule would solve problems in an industry known for its dirtiness except policymakers are thinking with their hearts while sitting in their airconditioned offices away from the facts and any form of interaction with the real world of shortterm loans just the fact that they see the shortterm loan industry as dirty supplies sufficient reason to believe that either these policymakers are ignorantly prejudiced or plainly manipulative 
  instead of pointing fingers and name calling at the shortterm lending industry they should be applying simple economics to their proposals to see if they hold water 
  in understanding the cfpb proposal for payday and other small loans a paper released by the cfpb and pew charitable trusts the bureau aimed to make several arguments in favor of new legislation 
  the first of its arguments is that with payday and vehicle title loan markets lenders and borrowers interests are not aligned because profitability for lenders depends on loans being unaffordable for customers but doesnt this argument stand for any industry that sells a product 
  for example are the interests of iphone sellers and buyers aligned in the manner acceptable to the cfpb each additional iphone  is said to cost  to produce and is sold for  dollars that is  times its cost to make to borrow a phrase from the left thats pricegouging to the tune of  percent yet there is no noise from policymakers claiming to call apple a company that cheats its customers 
  so why should shortterm lenders be held accountable in any way that is different than apple shouldnt shortterm lenders be able to charge interest rates that makeup for the huge risk they incur in lending money out to lowincome borrowers 
  studies show these lenders charge on average  percent or  for every  loaned  a profit margin that is significantly less than the price percentage difference of products in other markets 
  the second of the cfpbs arguments is that to solve for balloon payments or the cycle of continued borrowing to pay off loans the cfpb would require that most products become installment loans with smaller manageable payments 
  the problem with this statement is that the bureau completely ignores the reason why shortterm loans are so available to borrowers  its because shortterm loan companies can offset risk by requiring borrowers to weigh their own risk against their need to borrow 
  simply put the short payment periods are put in place to deter those who definitely should not borrow additionally making the periods longer and the payments smaller defeats the business model making shortterm lenders irrelevant because their models are defined by their expediency 
  the third of the cfpbs arguments is that their proposal would solve the problems related to price gouge lending by requiring lenders to evaluate borrowers financial condition by forcing borrowers to submit written statements on income housing expenses all outstanding debt and child support meanwhile the lender is required to obtain a national credit report and then deliver that data to all proposed credit tracking agencies 
  remember all of these governmentimposed requirements cost the shortterm lenders money the cost of finding out this data would eliminate any ability that firms have to loan small amounts of cash at current interest rates the result would either lead shortterm loan companies to shut down or further hurt borrowers by requiring that they borrow larger sums of money to qualify for loans 
  lastly the cfpb heralds that their redesign is prompted by a study by the pew charitable trusts survey research that the vast majority of borrowers want  most products to become installment loans with smaller manageable payments 
  at first glance it seems that borrowers in need are hurting and want to find a way out of a difficult situation although there are those who are caught in the inability to pay back loans because they got caught in bad finance due to the risk of shortterm loans many of those surveyed actually sent in raving reviews in support of shortterm loans 
  in fact more than  percent of the  submissions to the bureaus  tell your story  program  where people sent in their experiences regarding shortterm loans  were positive and excessively thankful for these loans 
  these responses ranged from there are no other avenues out there that can lend money like this to a simple thank you this study was personally conducted by the cfpb unsatisfied with the results they hid it from the publics view until a freedom of information act request forced them to release it 
  this holding back of information demonstrates that the bureau is not truly searching to help the people it says it wants to help rather they have a keen eye for policy symbolism and the flash of fighting for the underdog when in fact they are irreversibly harming them while sticking a knife in their back 
  policymakers continue the belief that shortterm loans are as bad as they seem comes either because they did not attend their economics classes in college or they simply want to be perceived as someone who cares but we cannot let policymakers make decisions because their hearts lead them to make uneducated proposals we cannot let legislators sway our hearts because we hear about the extreme situations where people are hurt instead we need to look at the coldhard facts the numbers that the cfpb uses to defend their arguments are manipulative and outright false 
  the small dollar lending rule must not be allowed to pass and the proposal must be removed and taken back  it will only hurt the people it claims it will help let americans make decisions for themselves  theyre smarter and more riskaverse than washington insiders give them credit for 
  jonathan lee is a filmmaker and freelance economics journalist he is an alumnus of chapman university newsletter sign up