
Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within - bkohlmann
https://www.nytimes.com/2019/04/16/magazine/consumer-financial-protection-bureau-trump.html
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JackFr
Alternative title: Elizabeth Warren succeeds in creating agency insensitive to
political pressure.

I think the current administration is absolutely wrong about the payday loan
industry. But at the same time the law that created the CPFB was terrible, and
its frankly shocking to me that Elizabeth Warren failed to foresee this. She
purposely created a particularly undemocratic institution which quite
predictably, but to her horror, went off the rails.

The way to stop payday lending is through congressional action. The way to
counteract unfriendly lobbyists is with horse trading. One of the reasons
legislation like this has become harder is the disappearance of earmarks.

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Matticus_Rex
"stop payday lending"

Have you asked any poor people about that? Because getting rid of payday
lending just leaves people with worse options or no options at all.

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JackFr
I'm not naive. I understand the difficulties of unsecured consumer loans to
the poorest borrowers.

As a society though, there are contracts which are unconscionable and these
should not be enforceable by law. A lender who typically faces default rates
of less than 10% while charging APR's greater than 400%, in my view should not
get to use the full force of law to enforce their collections.

~~~
Matticus_Rex
I'm a member of society (with a law degree) and think these are absolutely
conscionable and in many circumstances (some of which I've been in), are
absolutely beneficial. Looking at the APR on a very short-term loan for a very
small amount is missing the forest and the trees for the crack in your
glasses.

If you think these loans can be provided at a significantly lower rate, then
you've obviously got a huge market opportunity in front of you, and should
pursue it. Otherwise, you're advocating for removing what is often the best
option in unfortunate circumstances.

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ABCLAW
I think it's patently obvious that these services rely on unconscionable
contracts - they are literally premised upon financial coercion. However,
litigation on the basis of unconscionability is unlikely to be successful due
to market realities in the legal field.

Payday loans offer financially distressed individuals a method of accessing
financing, despite their risk profile. This is laudable.

However, most studies on the matter produce voluminous reams of data regarding
the debt-trap the industry creates. Ultimately, the public ends up shouldering
a lot of externalities created by this loop.

Can we achieve the beneficial results while attenuating the magnitude of the
wealth transfer from the poor and from taxpayers to the creditors in this
instance?

It seems we can - there are other models used in the development world for
delivering micro-loans which work better. But could they outcompete the
margins generated by debt traps? Unlikely. Another avenue is to regulate the
industry - which we already do. The Truth in Lending Act arose partially as a
result of people being lied to about the contents of their credit agreements.
We could create a schedule of fees for advanced amounts, allow for
applications for non-scheduled fees on the basis of exceptional Opex or Capex
requirements to serve a given community, etc with supporting margin
calculations. This isn't hard - we already do far more complicated work in
setting acceptable profit margins in construction, utilities, telecom, etc.

Are these solutions perfect? No. But are they better than the status quo? It
would appear so. That's why we've migrated off the payday loan model for
producing beneficial results in areas where the profit motive isn't the driver
of service growth.

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abernard1
This article leaves off a very critical detail around why people were critical
of the CFPB in the first place.

Contra this statement:

> Their unease had only grown as Mulvaney ordered a hiring freeze, put new
> enforcement cases on hold and sent the Federal Reserve, which funds the
> C.F.P.B., a budget request for zero dollars, saying the bureau could make do
> with the money it had on hand.

That was advertised as a feature of the CFPB when it was originally created,
as they are funded from the fines they collect from violations.

Anyone who has a problem with the incentives in privatized prisons should have
a problem with the funding structure of the CFPB, as they are both policing
for profit.

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JohnFen
The main problem with things like privatizing prisons is that doing so
seriously reduces the ability of the citizenry to affect how they operate,
compared to them being run by the government.

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abernard1
In that case, the citizenry voted their opinions on how the government should
run the CFPB for 4 years.

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JohnFen
That's a bit of a stretch. But at least the citizenry is able to do so.

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Animats
He's doing his job: keeping the little people in their place.

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Animats
The easiest way to stop payday lending is to mandate weekly pay for anyone
making under $100K a year. Why should workers be loaning two weeks pay, on
average, to their employer?

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hguhghuff
Can someone summarize please? I can't see through the pay wall.

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HeWhoLurksLate
Here's a mirror: archive.is/fl5ta

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tomohawk
Live by the sword, die by the sword.

The CFPB is an extra-constitutional body. It's creation and whatever happens
to it just showcase how off the rails things are.

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cylinder
Extra constitutional? What does this even mean? What is every other government
agency then?

~~~
BalinKing
> The powers not delegated to the United States by the Constitution, nor
> prohibited by it to the States, are reserved to the States respectively, or
> to the people.

\- Tenth Amendment, Bill of Rights

The federal government does not have the right to create agencies and
regulation at will. With certain exceptions (e.g. the DoD), it is reasonable
to conclude that many federal agencies are, in fact, unconstitutional in
scope.

