The Militant Libertarian

I'm pissed off and I'm a libertarian. What else you wanna know?

Wednesday, October 14, 2009

Gov’t foreclosing freedom

by Star Parker

The latest installment of “change we can believe in” is sweeping reform of the financial services industry.

Central to proposed Democrat reforms is the establishment of a new Consumer Financial Protection Agency. This agency would have broad authority to oversee and regulate financial service products like mortgages and credit cards and will be responsible to protect consumers from “unfair” and “abusive” products.

Unfortunately, when bureaucrats get authority to determine what is fair, the very people who they supposedly are charged to protect - us - are the ones who get hurt.

The most important product in our country is freedom and, unfortunately, it’s this product that President Barack Obama and House Financial Services Chairman Barney Frank find most defective. They really think that politicians and bureaucrats can take best care of the people.

Consider one of the most besieged financial services businesses in the country: payday advance loans.

The industry got started in the 1990s and now delivers about $40 billion in short-term, low-denomination loans. You can’t help but conclude this is a service many consumers want.

Yet the industry is under constant attack by groups who appoint themselves to be the champions for consumer protection.

Regarding payday advance loans, their claim is that fees are too high. The business is regulated at the state level. State-by-state initiatives have been advanced to put ceilings on rates loan providers can charge.

Voters in Ohio last year approved capping annual rates on payday loans at 28 percent.

The result? According to one industry spokesman, “700 of the 1,600 payday loan offices in the state have closed.”

No one has been protected. They’ve only limited options available to free men and women.

There are many firms providing payday advance loans - I count 55 on the membership list of their trade association - so clearly competition is fierce to price these loans competitively.

It’s not an accident that the same organizations that attack the payday advance business are lobbying for the Consumer Financial Protection Agency. Nor is it an accident that one of these organizations has been scandal-drenched ACORN.

Economist Milton Friedman once observed, “Many people want government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”

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