Well, well, well. We are supposed to feel really good because on October 1 Virginia is finally going to “regulate” car title lenders, those leeches who give some poor guy down on his luck money in return for the title to his vehicle, which they can then repossess and sell at auction when the poor guy can’t pay the exorbitant interest rate charged on the loan. To call the law that passed in Virginia regulation is a joke. There is absolutely nothing in it for the lenders to worry about. Why should there be? They helped write it, but more on that later.

The bill introduced by Dick Saslaw (D-Springfield) to regulate car title loans still means that companies in that sleazy business can charge interest of 22% per month on the outstanding balance of a loan for $700 or less. Plus, the law puts no cap on the size of the loans. Lenders are at least barred from continuing to charge interest on a loan after they repossess a vehicle or going to court to seek a “deficiency judgment” after they take someone’s vehicle and sell it.

According to Richmond Sunlight,  

Under this measure, if the loan balance is not paid in full within a 25-day grace period (in which case interest does not accrue), interest shall not exceed 22 percent per month on the portion of the outstanding balance of the loan that does not exceed $700; 18 percent per month on the portion between $700 and $1,400; and 15 percent per month on the portion that exceeds $1,400. There is no cap on the size of such loans. Money advanced under the loan agreement is required to be repaid in monthly payments over the 12 months following an advance.

Perhaps an actual example can show us just what a scam this kind of loan is.

Let’s say you go and get a $600 loan and relinquish the title to your car to get it. Under the new regulations, the loan company can charge you 22% interest per month on the outstanding balance. Before you walk out the door with your $600, you already owe $732 when your first payment comes due. Let’s say you pay $200 at the start of the next month. That brings the loan down to $532, right? No. That brings the loan down to $532 plus 22% interest, or $649.04 by the time you make your next payment.

Your second payment of $200 should bring you down to $449.04, right? No. The actual outstanding amount now is $547.83. Your third payment of $200 the following month means that you have paid back the original loan, the amount of money you actually got. However, you still own $424.35. Put another way, you didn’t get a loan for $600. That loan was for $600 minus all that interest, which will add up to far more than $600 by the time you are able to get out of the clutches of the car loan sharks.

The new Virginia law says that the car title people are supposed to explain to a potential “customer” the actual cost of the loan. We all know all the ways for a lender to get around that little detail, especially since the lender is dealing with somebody obviously desperate for money. Never forget one fact, though. Anyone who gets a car title loan is actually selling that car to the loan shark, in the hopes of someday being able to buy it back at far, far more than the amount of the loan.

These title loan companies get rich by preying on the misfortune of others because they know most of their clients probably won’t be able to pay back the loan. Even if the car loan was at a reasonable interest rate, the people offering the loan aren’t taking a chance at all. They have in hand from day one the ownership of – and keys to – a vehicle that they got for much less than its blue book value, one that is being insured by the person who in effect no longer owns the vehicle. The borrower even pays the administrative cost of making the loan, through an origination fee. Such loans are a sure-fire way for the lenders to make a fast buck. They can’t lose.

Who would risk the title to their car except someone desperate? The lenders make it sound like they are helping with the misfortunes of life, but actually they are making a fortune at the expense of the unfortunate. The law passed in Virginia does absolutely nothing to rein in these despicable loans. So, how did we get such a crappy law? The way we always seem to – let the regulated and their highly paid lobbyists write the regulations.

According to Bloomberg Businessweek “For years the industry fended off calls for tougher regulation. Since 2005, six companies and industry groups have donated nearly $1.2 million to Virginia lawmakers as legislation to regulate the industry languished in committees. Last year, the industry and its opponents worked with legislators on the compromise.”

Evidently, that’s how regulation works in the Old Dominion, the land of unlimited campaign contributions. The industry that needs to be controlled sits down with the people who are going to write the legislation, and they come up with a metaphorical fig leaf that gives cover to both groups. Legislators can say they “regulated” a bad business. The businesses can chuckle to themselves because they get a “two-fer:” they essentially get to write their own regulations, plus they don’t have to put out all that money in campaign contributions any more. Well, except for the thank-you money to the compliant lawmakers who participated in the whole deal. But, remember. It’s not bribery. It’s just getting “access.”

If the unremitting drumbeat from the punditry that there is a Republican tsunami on the way in November should prove true, what will happen after November?  Steven Pearlstein, in his column in The Washington Post for Wednesday, 29 September 2010, gave some thought to the appearance of the political landscape if the Chamber of Commerce and Big Business gets its money’s worth, and succeeds in turning Congress Republican red. His short answer to the CEO’s devout hope is: “Be careful what you wish for.”  

Business imagines that with Republicans in control of the House and maybe even the Senate, the climate will become very pro-business, that business will be “setting the agenda, rolling back the socialist tide and forcing an anti-business administration into a humiliating retreat.” Not so fast, folks. In Pearlstein’s judgment:

“In reality, what you’ll get is political paralysis for the next two years, and quite possibly longer than that”

 

because Senator Jim DeMint (R, SC) will be riding high as “the new Republican kingpin and enforcer,” and, in an interview in Bloomberg Businessweek, he promised that “his goal for the next Senate is ‘complete gridlock.'” Without doubt, the eager right-wing  newbies arriving on the crest of the tsunami will follow DeMint’s orders gleefully. DeMint forsees no compromises, and will accept no “watered down Republican philosophy.” This will be war, and it’s once again “my way or the highway.” In other words, ideology over governance.

Pearlstein has some good news on the good-for-business side: Business, will not have to worry about tax increases, or climate-change legislation, or pro-labor legislation like card check. On the other hand, says Pearlstein, there will be no tax reform, no education reform, no infrastructure investment, nor any new trade treaties. In his estimation, neither the remaining Democrats in Congress nor a veto-wielding President will be inclined to strike any deals on business’ priorities.  What if the President tries to do by issuing regulations what Congress under Republicans will not do? If he does try an end run, Republican-controlled committees will respond with hearings, there will be endless lawsuits, and nothing will be resolved until it has wended its way through the courts, likely a years-long process. Therefore, regulatory uncertainties will continue, even if Republicans win in November.

While I myself am not so certain as Pearlstein that Democrats and President Obama will refuse to knuckle under and tamely enable the continued Republican rape of America, I do believe much of what he predicts will come to pass, and we will have a viciously paralyzed government.  That, however, is exactly what Senator DeMint wants, and so do every one of those right-wing Tea Bagging newcomers—– some have even said that it would be ideal for “Congress to take a two-year holiday, or longer.” Pearlstein warns the business community:

“Here is the hard political reality. You can’t expect to support and finance political candidates who preach that government is menacing and wasteful, that public employees are incompetent and corrupt, that taxes are always too high and destroy jobs, and then turn around and expect that the government will respond to your demands to hold down the cost of health care, or fund basic research, or provide good schools, effective courts and reliable transportation systems.”

In other words, Big Business will reap what it has sown; the whirlwind they have created will not be under their control.  Here again, I am not so sure. The Tea Partyers will, I suspect, be as malleable in Congress as they have proven to be in town halls, psychologically manipulated to continue enabling the use of the shell of our political government for the enrichment of the business oligarchy. It may be a bit more difficult than Big Business expects, but I think it will happen, for two main reasons: the power of money (threaten the recalcitrant by withdrawing campaign funds or other emoluments) and the power of their secular religion, Free Market capitalism.

Mr. Pearlstein makes another valid point, that business leaders should blame themselves as well as the media or the blogosphere for the horrible polarization of our system: “….in order to score modest wins in legislative or regulatory battles, (you) make common cause with those who trample on the truth, poison the political conversation, demonize opponents and undermine respect and support for government. Criticize President Obama—- that’s easy, guys. But is there anyone there at the Business Roundtable with the courage to criticize Jim DeMint?”

The real result of a Republican victory, and the entrenchment of Senator DeMint and his happy band of anti-government radicals will be to devalue and trivialize government, the only institution big enough to rein in the excesses of Big Business. Maybe, Mr. Pearlstein, that is the real reason so much corporate money is pouring into the coffers of the Tea Party radicals; it is not to “score modest wins.” The intent is actually to create what you are warning against—- to “undermine respect and support for government.”

As rain continues moving up from the south across Virginia, looks like it’s going to get even rougher tomorrow. Tropical Depression 16 is forecast to become Tropical Storm Nicole, moving quickly up the Atlantic Coast over the next few days. How much rain will she bring? Weather.com reports, “Localized amounts of 8 inches or more are not out of question,” in the eastern half of Virginia & the DC area.