Time to start nailing down my positions on the issues.
The Office of the Insurance Commissioner is tasked with a wide variety of responsibilities in the great state of Georgia. Regulating the delivery of insurance products is the best known but the office is also in charge of regulating "Small Loan" or "Industrial" operators as well.
As a Libertarian, I am of the belief that if two citizens sign a contract, then the terms of the contract should be binding. That belief has an underlying assumption that both parties are able to walk away from a bad deal and seek more suitable terms for said service from another provider. As a Georgian I know that this is not always the case.
There are quite a few citizens in Georgia that do not have access to capital from traditional sources because of poor prior performance with credit products, documented income that is below lending standards and a host of other problems that can blacklist a borrower in need. These are the people that the Industrial loan operators target. While it is true that the legislature overhauled the Pay Day loan statues several years ago with the Payday Lending Act of 2004, the business has adapted to the changed environment and is flourishing. Just type "Pay Day Loan Georgia" into your favorite browser and watch what happens.
What to do? The Office of the Insurance Commissioner regulates these guys according to the statutes passed by the legislature. The old methods of separating the citizen in need from his money are no longer valid so the business changes it's process and still retains the exorbitant profits while complying with the law. And the citizens of our dense urban areas, our poor rural areas and our citizens in uniform are left with limited choice. Agree to an outrageous loan package or watch Georgia Power turn off your lights, or wave good bye to your car as a repo man hauls it off or suffer with that wisdom tooth that's not covered by your dental plan. Your choice.
The biggest argument made by the operators and owners of these Industrial Loan products is that people need them. If there was no immediate need, there would be no Industrial loan industry. If citizens were not willing and able to pay an effective rate of 391% APR for a $400 dollar two week loan they simply would not. And there is some truth to that statement. But is there Justice?
As a Libertarian Politician running for the office of Insurance Commissioner, I think it's time to include this mess in the general debate. I have yet to formulate a platform plank on the topic but I am working on it. And an article published yesterday in the Athens Banner Herald by Johnathan McGinty has a big clue about a solution. In North Carolina they have used the credit union model to build a robust, economical solution for NC citizens who need small loans with out expanding government or increasing taxes. Quote:
In North Carolina, the state's credit union has decided to simply interject some old-fashioned market competition into the mix. The North Carolina State Employees' Credit Union has grown to become the largest lender to the state's low-income population.
It provides more than 50,000 individual loans per month. These loans, of less than $500, feature an interest rate of 12 percent. Each time a loan is processed, 5 percent of its value is placed into a savings account for the borrower.
Perhaps Georgia would be wise to follow suit.