Earlier this week in comments to North Country Public Radio New York Governor Andrew Cuomo warned that “many New Yorkers are vulnerable to predatory businesses because they are shut out of the banking system.” To help combat the problem, he introduced a banking proposal to invest $25 million over the next five years in the state's Community Development Financial Institutions, which are largely funded via the U.S. Treasury Department’s CDFI program. AFSA recently published a white paper on subsidized loan programs.
Under the proposal, the funding would serve economically distressed communities and people on limited incomes with flexible rates, lower-interest loans, and low overdraft fees, while also expanding financial literacy education.
While helping consumers who do not have access to a bank account or affordable credit is a worthy goal, the governor has it backwards. What New Yorkers need isn’t more taxpayer money being spent, it’s policies that enable borrowers to access the credit they need.
New York caps its lending interest rate at just 16 percent, far too low for many reputable lenders to conduct business, forcing consumers with poor credit or no credit to seek small-dollar loans or shorter-term loans – the types of loans the people Cuomo is trying to help typically might be seeking – from less-reputable financial operators.
In a recent Real Clear Policy post , Tom Miller, the Jack R. Lee Chair in Financial Institutions and Consumer Finance at Mississippi State University and Todd Zywicki, a University Foundation Professor of Law at George Mason University Antonin Scalia School of Law noted: “A primary function of credit is to smooth consumption. More than a third of households making under $50,000 experience month-to-month spikes and dips in their income. Small-dollar credit products help them deal with unforeseen expenses. The choice for these consumers is between using small-dollar credit products and simply going without.”
Miller and Zywicki were talking about a 36 percent interest rate cap which is currently part of a misguided bill in Congress. Sixteen percent essentially guarantees that these consumers will not have access to the loans they need.
Governor Cuomo should be commended for his emphasis on financial education and working to make banking products more accessible to consumers. He should, however, also acknowledge that the reason CDFI is needed to help fill an unmet need is due to the misguided policies the State of New York imposed on the financial services industry in the first place.
Governor Sees the Problem, Not the Solution
Jan 15, 2020
Earlier this week in comments to North Country Public Radio New York Governor Andrew Cuomo warned that “many New Yorkers are vulnerable to predatory businesses because they are shut out of the banking system.” To help combat … Read the rest
Getting Under the Hood – Understanding Cyber Risks
Jan 13, 2020
You might be knowledgeable enough to change the oil in your car, but are you able to get under the hood of your business and understand cyber security risks?
Don't miss this thought-provoking session at the 2020 AFSA Vehicle Finance Conference… Read the rest
The Wrong Kicks on Route 66
Jan 10, 2020
Tom Miller, a professor and Jack R. Lee Chair in Financial Institutions and Consumer Finance at Mississippi State University and Todd Zywicki, a University Foundation Professor of Law at George Mason University Antonin Scalia School of … Read the rest
2019 Review/2020 Preview from the State Capitols
Jan 10, 2020
On January 6, AFSA’s State Government Affairs department published its 2020 State Legislative Preview and 2019 Review white paper. Published monthly, AFSA’s state white papers typically provide a snapshot in time covering… Read the rest
RELEASE | AFSA Welcomes CFPB Taskforce Appointments
Jan 09, 2020
WASHINGTON, DC (January, 9 2020) – The Consumer Financial Protection Bureau today announced the makeup of its Taskforce on Federal Consumer Financial Law, which will examine the legal and regulatory environment facing consumers… Read the rest
Looking Back at AFSA’s Success in 2019
Jan 09, 2020
AFSA’s federal government affairs team continued to be highly effective in advocating for the protection of consumer credit and choice in 2019. Below are just a few of the 2019 federal successes.
Rate Caps: Prevented legislation extending… Read the rest
LISTEN | Frank Salinger on the AFSA Extra Credit Podcast
Jan 09, 2020
In this episode of the AFSA Extra Credit Podcast, we’re speaking with Frank Salinger, a longtime consultant for and former staff member of AFSA. Frank really needs no introduction – he’s been an integral part of protecting… Read the rest
An Open Letter to Their Highnesses the Duke & Duchess of Sussex
Jan 09, 2020
TRH Duke & Duchess of Sussex:
Starting a new, exciting chapter in one’s life can be fraught with challenges for anyone, especially when they are seeking to establish financial stability and independence. How to open up a checking
DoD’s MLA Rulemaking Should be Fact-based
Jan 08, 2020
Recently, the Department of Defense (DoD) sent a response to 23 Members of Congress who sent a bipartisan letter urging the repeal of Question and Answer #2 of the December 2017 Military Lending Act (MLA) interpretive guidance. In its letter,… Read the rest
Registration is Open for the Independents Conference & Expo!
Jan 08, 2020
 Stan Butler AFSA Independents Section Chairman President & CEO Heights Finance |
Don’t wait for nature to bring the warm weather to you – join us April 28- 30 in Palm Springs, California for the 2020 AFSA Independents Conference |