By Rick Manning

The Virginia legislature is rushing to pass a bill that would have disastrous consequences for Old Dominion residents.

In the coming weeks, a law that would cap at 36 percent the interest rate on short-term loans up to $2,500 and impose other limits on lenders will be voted on in the General Assembly after the bill passed through committee.

Rep. Terry Kilgore argues the potential adverse impacts of the bill are not being thoroughly considered. “We have no statute to cover somebody offshore. [The bill is] going to drive a lot of people to the internet and offshore lending,” he said.

In contrast to this hastily assembled bill, the current small-dollar lending regulations were carefully crafted by lawmakers, in consultation with stakeholders representing consumers and lenders, to balance access to credit while preserving critical consumer protections.

The new bill would undo these regulations in favor of measures restricting Virginians’ consumer choice, forcing those who need cash to turn to unregulated sources.

People in need of cash to pay bills or cover unexpected expenses like car repairs will not disappear after this law is passed. Virginians will instead turn to unregulated lenders, pawnshops and lenders who are uncompetitive in Virginia, but who will offer loans if the state drives their competition out of business.

Several out-of-state lenders publicly support the bill and promise to provide loans in Virginia if the bill passes. There is no guarantee these businesses, who have no track record of serving Virginia consumers, will be reliable lenders. Additionally, most of these companies have strict standards that would exclude many of those who use short-term loans.

What’s more, if these outside corporations offered a better deal for Virginia consumers, they would already be winning the business of consumers due to their superior, lower-cost product.

The simple truth is that the legal, regulated short-term loan business met needs that traditional banking establishments failed to meet.  In fact, the usurious fees for account overdrafts contribute greatly to the de-banking of our nation’s least affluent consumers.

Before hastily enacting a rate cap, the Virginia legislatures needs to consider what has happened in other states that passed similar bills.

After the Ohio legislature, for example, passed a similar bill, over 100 lenders went of business and Ohioans found different ways to obtain cash through pawnshops, second mortgages and unregulated lenders.

Professor Stefanie Ramirez analyzes Ohio restrictions on short-term lenders writing, ”Policymakers may have simply shifted operating firms from one industry to another, having no real effect on market conduct.”

This bill does not protect consumers; it forces them to use less preferred and riskier options to obtain cash. This bill will not change the reality that Americans are often strapped for cash and need a loan in a pinch.

Take for example, the fact that one in 10 Americans, according to conservative estimates, would be unable to afford a $400 emergency expense, according to a recent report from the Federal Reserve.

More importantly, this same group of people wouldn’t even be able to charge a $400 surprise bill to a credit card. “Twelve percent of adults would be unable to pay the expense by any means,” reads the report.

That leaves a significant percentage of Americans in a precarious financial situation, which current, regulated short-term lenders meet. If small-dollar lenders are forced out of the marketplace, or if large financial-service companies are allowed carve-outs and permitted to monopolize the industry, these same Americans will be forced to seek out riskier, black-market kinds of short-term loans.

As Diego Zuluaga, a policy analyst at the Cato Institute, says, “Low usury caps were once widespread across American credit markets. But Progressive reformers in the early 1900s recognized that these caps harmed low-income people by throwing them into the hands of loan sharks. Gradually, they persuaded legislators to lift or remove interest caps, helping the formal market for small-dollar credit to flourish.”

It’s important to learn from the mistakes of past legislators, not repeat the same mistakes. That, however, is exactly what this bill would do if Virginia lawmakers decide to move forward with it—a move that would only serve to eliminate the few safe options low-income households have to makes ends meet when unexpected bills hit.

Even the U.S. Hispanic Chamber of Commerce agrees with the notion small-dollar-loan caps hurt Americans. The chamber fought back when in 2016 the Consumer Financial Protection Bureau proposed a rule change that capped interest rates on small-dollar loans.

As the chamber said in a statement back then, “The CFPB’s rule would harm the millions of consumers who use payday loans responsibly to manage unexpected and periodic financial difficulties.”

Despite the rhetoric, the Virginia Bureau of Financial Institutions annual report shows the regulations passed in 2009 are working. Instead of proposing changes to Virginia’s current payday lending laws that could put the entire industry out of business, legislators should re-direct their attention to focus on unregulated credit products.

Americans aren’t stupid. They understand the risks involved when taking out small-dollar loans. Shrinking or eliminating the small-dollar-loan market will only serve to hurt those who find themselves in difficult circumstances. For this reason, lawmakers should make sure this bill never makes it to the governor’s desk.

Rick Manning is the President of Americans for Limited Government.

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Iowa Caucus chaos incompetence, or manipulation?

Feb. 4, 2020, Fairfax, Va.—Americans for Limited Government President Rick Manning today issued the following statement on the Iowa Democratic Party's failure to report results from the Iowa Caucus:

"The same Democrats who want to run our nation's health care system cannot manage to even count a few votes in Iowa. It is clear that the Iowa Democratic Party either is beyond incompetent or is corruptly attempting to put their thumbs on the scale to deny Bernie Sanders momentum and prop up the failing Joe Biden campaign. The real tragedy is that the Iowa Caucus is likely to become a thing of the past due this recent history of manipulating and misreporting. The shame of it is national candidates benefit from meeting farmers and spending time in middle America and Democratic candidates particularly benefit as they get off their coasts and visit what they view as flyover America once every four years.

"The big winner of the Iowa Caucus was not Bernie Sanders, it was President Donald Trump who has demonstrated the past three years that he can lead this nation to prosperity and restore our standing around the world, while his Democratic opponents cannot even be trusted to perform a simple task with telephone technology."

To view online: https://getliberty.org/2020/02/iowa-caucus-chaos-incompetence-or-manipulation/

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ALG Editor’s Note: In the following featured oped from Foxnews.com, White House Policy Director Joe Grogan makes the case for school choice:

Every American child should have a choice when it comes to school

By Joe Grogan

The foundation to achieve the American Dream is anchored in hard work, perseverance and, most importantly, a quality education. Every child in America that has a meaningful chance to learn, can unlock the gateway to success.

America’s antiquated approach to education is failing our country’s youth, and Washington is crippling our ability to provide a world-class education to every American child. When we fail to set America’s children up for success, we fail as a nation.

Many incredible public and private schools are preparing students to succeed. Most kids have the potential to access an education that will allow them to pursue remarkable success. But, far too many kids, especially in our nation’s poorest cities, are not allowed to capitalize on that opportunity. We must remain committed to revitalizing the American dream, and that means revitalizing our broken education system.

Too many of our children are assigned by the government to schools that simply don’t work for them and their parents don’t have the economic means to do anything about it. They’re stuck with no real options and often become just another statistic. Zip codes and invisible lines drawn by government bureaucrats are constraining the success of our children.

Advocates of this failed status quo are quick to highlight good graduation rates, but they ignore the fact that our students still continue to lag behind their peers worldwide. The Program for International Student Assessment (PISA) found that 28 countries outperformed U.S students in math and 17 outperformed U.S. students in reading.

The most recent “Nation’s Report Card” found that two out of three students can’t read as they should. And inner-city, low income, and minority children perform even worse. Nearly half of fourth-graders who qualify for free and reduced lunch are functionally illiterate.

Only about half of America’s high school students took the ACT college entrance exam last year. Just a quarter of them are college-ready in multiple subjects.

The education establishment terrified of losing control to parents and students has ripped the American Dream away from forgotten families across the country, prolonging the cycles of poverty, crime and despair. The Trump administration continues to promote policies that provide low-income students and all students with the tools freedom necessary for long term economic security. Our policies can help end this devastating cycle and empower students to thrive and fulfill their American Dream.

Forty-three states have public and private school choice programs, which allow parents to decide how and where their children learn, regardless of school zones. Nearly 500,000 students are enrolled in private school choice programs, and more than 2.5 million students enrolled in public charter schools nationwide. Yet, more than one million students are on waitlists to attend public charter schools of their choice. In Pennsylvania, special interest groups motivated Democratic Gov. Tom Wolf to veto a bill that would have helped 50,000 waitlisted kids to pursue the education that was right for them.

The politically powerful should not deprive children of a great education, and no child in America should be on a waitlist for success. That is why President Trump has called on Congress to pass Education Freedom Scholarships. The bill currently before Congress is a federal tax credit that would provide families with more educational opportunities. The proposal will bolster state efforts by providing $5 billion to state-based scholarship programs. The legislation would empower parents to send their kids to the desired public, private, religious, public charter, home, or magnet school that they feel best meets the needs of their children.

Families in states such as Florida, Pennsylvania, Ohio, North Carolina and Wisconsin, which have school choice programs, will greatly benefit. Other states will also be encouraged to step forward and leave the failed status quo behind and put America’s children first!

The truth is that families who can afford private school tuition or who have the means to move out of a bad school zone already have education freedom. All American families need that freedom. States across the country are empowering families to enhance their child’s education. Americans should rally behind President Trump’s plan to ensure that every child has a chance to achieve the American Dream.

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