Markell’s Smoke and Mirrors about Payday Loans

Discerning readers can see through this pseudo-toughness:

Convinced that poorer Delawareans are being trapped in a "cycle of debt," Gov. Jack Markell and legislative allies are taking aim at the payday loan business with a bill that would tack a $1,500 surcharge onto the licensing fee paid each time a new location opens.

The governor hopes that the surcharge will discourage the industry from expanding in Delaware, and also help pay for financial literacy education and publicizing low-interest loan programs through the state.

That's it? A $1,500 surcharge on the licensing fee? Don't make me laugh. That won't discourage payday loan businesses from opening up new locations. We need interest rate caps. But that isn't going to happen:

The bill, which is expected to be introduced today, does not include the interest rate caps that consumer groups and other states have said are an important tool for protecting people from paying the equivalent of a 400 percent annual percentage rate for some loans. (emphasis mine)

According to the Center for Responsible Lending, "payday lenders structure the short-term loans so they are difficult to pay off, forcing the loan to be 'rolled over' without paying down the principal."

What is Gov. Markell's excuse for not capping the interest rates of these veritable loan sharks?

"It's just not how we chose to address it," Markell said.

Bull. That's just another way of saying he has no valid excuse for failing to cap their interest rates. And that $1,500 surcharge won't discourage the opening of new payday loan locations and Gov. Markell knows it. The $1,500 surcharge is just revenue for Delaware's yawning budget deficit.

This is all smoke and mirrors.