Archive for category Commentary & Editorials

Loan Sharking and Payday Lending

In the struggle to regulate the short term, small dollar loan industry, one theory regularly pops up.  This theory states that if such loans are capped and regulated, violent loan sharks will take the place of legitimate small loan businesses that would not be able to survive under such onerous regulation.  The violent loan shark threat is mainly raised by industry members and supporters, as most recently happened in Idaho, where a legislative fight to rein in payday loans is waging.  An industry supporter quoted in the local news cautioned that making it harder to obtain payday loans could drive borrowers underground. “The danger is that they turn from this sort of legal high-cost loans to illegal high-cost loans such as loan sharking, which, of course, is not a good thing.”   In a 2012 article from the Washington and Lee Law Review entitled Loan Sharks, Interest-Rate Caps, and Deregulation, Professor Robert Mayer debunks this  “loan shark thesis” using well-researched historical evidence and common sense analysis.

 According to Mayer, loan sharks have existed in America at least since the Civil War.  The name comes from their predatory behavior, in which the lender seeks to keep the borrower in a cycle of repeated renewals of the high-interest loan.  The lender is more concerned with the regular interest payments than the principal itself.  Enforcement methods of these early loan sharks did not involve violence at all; instead, loan sharks focused on non-violent personal harassment, wage assignments, and power-of-attorney based judgments to get their money.  The idea of violent loan sharks with ties to organized crime did not arise until the 1960s, when splashy headlines captured the public’s attention and forever linked the term to violent enforcement of repayment.

 Payday loan regulation was enacted in about three quarters of the states by the mid-twentieth century and was based on a common structure, which limited not only interest rates but contained other regulatory oversight.  By the 1950s, many commentators were declaring the problem of predatory lending over because of this regulation, which had placed reasonable limits on the small loan industry.

 According to Mayer’s analysis, violent loan sharks historically did not simply pop up wherever strict regulations were enacted.  They were limited to certain geographic areas, which tend to be large metropolitan areas like New York, Chicago, and Philadelphia.  This suggests that mob-tied loan sharks exist only where organized crime is prevalent, which makes logical sense.  It seems unlikely that criminals are in the business of monitoring legislation to pick and choose where they will operate as illegal lenders.  Moreover, loan sharks did not come about right after regulation; it took a relatively long time.  For instance, Illinois passed a regulatory law in 1917, yet there is no historical evidence of loan sharks being active there prior to World War Two.

Moreover, loan sharks do not target people living paycheck-to-paycheck because the loan sharks do not want to be forced to violently enforce the loan agreement; no one wins when the lender does not get his money back.  They are careful to only loan money to those who are likely to pay them back in a short period of time.  Payday lenders, on the other hand, cater to the working class who sometimes require cash to tide them over until their next payday.  The markets for loan sharks and payday lenders are entirely different, so a rise or fall in one will not necessarily affect the other.

 Nevertheless, the “violent” loan shark business and the payday loan business share a common business model.  Both are more interested in keeping borrowers in a cycle of debt and profiting from continued interest payments.  Multiple studies of the payday loan industry document that repeat borrowing is the norm, and that the industry depends on repeat borrowing to make enough money to stay in business.

 A number of states have never legalized the short term, small dollar loans commonly called payday loans, and several others who initially permitted payday lending have since imposed interest rate caps, or allowed enabling statutes to lapse.  Yet, the industry has not put forth any credible evidence of an influx of violent, mob-tied loan sharks roaming the streets, filling a lending void in those states.

 As Mayer notes, no specific evidence ties payday loan regulation to criminal lending because none exists.  Modest regulation of the payday loan industry does not bring violent loan sharking to the forefront of the small loan industry.  It does, however, save working class people money and helps prevent them from falling into a destructive debt cycle.

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Ohio At A Cross Roads: Medicaid Expansion

Ohio At A Cross Roads: Medicaid Expansion

The Ohio General Assembly and Governor Kasich are at odds over Medicaid expansion as anticipated by the Affordable Care Act.

The Governor, a conservative Republican, included a Medicaid expansion in the state budget for all Ohioans with incomes up to 138% of the federal poverty level. This is the right thing to do for Ohioans who are now uninsured and cannot obtain the care they need to become, or remain, healthy. It is also the right thing to do to help Ohioans become more employable so they can be self-sufficient and stable. It is also the right thing to do for the state’s economy and budget.

Expanding access to health care to address the needs of the uninsured and to help Ohioans become self-sufficient and stable is important, but the last point about the state’s economy and budget is why every member of the Ohio General Assembly should support the Medicaid expansion.

The Medicaid expansion draws federal dollars into Ohio. The Governor projects that $13 billion dollars of federal funding would come to Ohio by 2020. Other projections are as high as $20 billion. In any case, a huge amount of money would circulate and generate additional economic growth in Ohio’s towns, cities and counties.

The Medicaid expansion fills a $400 million hole in the state budget because it off sets costs for mental health, corrections, drug and alcohol treatment and other services.

Read more about the impact of a Medicaid expansion in Ohio, on the Office of Health Transformation’s website, http://www.healthtransformation.ohio.gov/LinkClick.aspx?fileticket=vDu4XgXYGm0%3d&tabid=136

The expansion has the overwhelming support of the public, stakeholders and others. Click here to see what stakeholders and editorial boards have said about the expansion.
What they are saying about extending Medicaid coverage: Stakeholders and Editorials

The House removed the expansion from the budget it passed and has said that it will consider an expansion in the fall of 2013. The Senate President has announced that he would support a separate bill to explore whether to expand Medicaid, but it is unclear when such a bill might be introduced, how quickly it would move, and whether the Senate would make it a priority.

In the meantime, the clock ticks on and Ohioans may not get the care they need and deserve, and the state will lose billions of dollars of federal funding, just when the state needs to increase its economic activity and growth. Standing in the way of expanding Medicaid is bad for the state and bad for Ohioans.

The Governor is right. Ohio needs to expand Medicaid now to provide care for its residents and to strengthen our economy. As concerned Ohioans, we should all first, contact the Governor to thank him for fighting for Medicaid, second, contact our legislators to ask them to do what is right for Ohio and Ohioans, expand our Medicaid program now and, third, tell our friends and neighbors to do the same.

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Medicaid Expansion is Right for Ohio (letter to editor, Columbus Dispatch, 4.4.13)

The Medicaid expansion currently being debated in the state budget would improve the health, safety and stability of Ohioans and Ohio families.

People who have access to health care are healthier. They get more appropriate preventive care and avoid emergency-room visits and heath crises. Many low-wage workers do not have access to employment-based health insurance, and they cannot afford to buy private insurance.

Families and individuals with access to health care are safer. They can get the health care they need, including immunizations and prescription medications, to avoid health risks and address chronic conditions.

Families and individuals with access to health care are more stable. Medical debt was a factor in 62 percent of the 38,000 bankruptcy filings in Ohio in 2012. Medical debts also play a significant role in home foreclosures. Access to health care would significantly reduce the number of bankruptcies and home foreclosures so that more Ohioans could remain economically stable and independent.

Debt also is a factor in domestic violence. Reducing medical debt would lessen family stress and domestic violence, keeping more families intact and stable.

Access to health care also will make Ohioans more employable, increasing their financial and social stability.

The Medicaid expansion would provide a helping hand to Ohio, Ohioans and Ohio families. It would keep Ohioans healthy, safe and stable. It is the right decision for Ohio and all of our residents.

– EUGENE R. KING

Director

Ohio Poverty Law Center

Columbus

http://www.dispatch.com/content/stories/editorials/2013/04/04/1-medicaid-expansion-is-right-for-ohio.html

 

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OPLC Fights to Preserve Ohio Consumers’ Access to Landline Telephones

This piece was written by OPLC Staff Attorney Joe Maskovyak.

The legislature has adjourned for the 2011-12 term, and opponents of SB 271, including OPLC, can breathe a little easier knowing that SB 271 died a quiet death when this legislature adjourned for the final time.  The breathing will only be a little easier, since the powerful telecommunications (telecom) lobby is certain to find a champion to reintroduce SB 271 – the latest telecom deregulation bill – soon after the new legislature convenes in January.

SB 271 was the latest in a series of telecom dereg bills, designed to grant increasing freedom to to the phone companies, all of which have been written and supported by the industry,  ostensibly to promote “progress and investment” in Ohio.  Of course, as is often the case, the guise of “progress” comes with a price.    SB 271 essentially would allow the market (assuming there is one) to regulate the price of landline telephone service, and the Public Utilities Commission of Ohio (PUCO) would not be able to establish any price caps on the cost of your phone rates.  Along with the end to price caps to protect consumers who could be gouged by unlimited rate increases, consumers would also see the elimination of what few consumer protections remain in the PUCO rules. Minimal protections, such as getting a phone installed within five days from the date you order and pay for services, or having the phone company reimburse you for outages if they take more than three days to repair them, would have gone away.  These are examples of regulations which phone companies apparently find too onerous and burdensome in conducting business.

SB 271 would have paved the way for landline operators to get out of the business of maintaining their existing lines.  This could lead to a host of problems.  Phone companies only had to show there was some competition but not necessarily competition to all communities.  Consequently, it is quite possible, especially in rural southeast Ohio, that a landline provider could withdraw from an area where cell phone coverage is spotty or nonexistent.  If your cable provider uses that same landline to transmit its signal, and the landline telephone provider leaves, you can also say good bye to your cable.   Alternatively, if you have cell phone coverage but no cell phone, you may be forced to buy one, even if you cannot afford to pay the cost for a new cellphone or for service, if you want to stay connected.

Finally, SB 271 would have signaled the end of Basic Local Exchange Service (BLES).  This is a no frills service that allows unlimited calling for a small flat rate for those who do not want or need more service.  Together with the end of BLES, “Lifeline” service, which allows affordable phone service for the very poor, could also have gone extinct.  This is because Lifeline is priced as a discount from BLES service.  How can one discount from something that no longer exists?

The extra time granted by the death of SB 271 should allow more time to better study a radical proposal that was rushed through the Senate and seemed to be gaining momentum before this legislative session ended.  OPLC believes there should be more time to study what would be a transformation of the telecom landscape.  In fact, the last telecom bill we saw in the legislature, SB 162, which passed in late 2010, statutorily created a study committee to report on that bill’s deregulation impacts.  A report is not due until 2014.  Sadly, the study committee has never been convened, much less begun to discharge its reporting duty.  Hopefully, there will be time for this committee to meet and report about the impacts of the last round of deregulation before we make decisions on further telephone deregulation in the next legislative session.

In the interim, however, we need stand vigilant to the reintroduction of a new telecom dereg bill similar to SB 271, which we at OPLC fully expect to occur when the legislature reconvenes in January 2013. We need to tell our legislators to tread slowly and carefully and to refuse to pass a new bill without full examining all of the possible consequences.  Consequently, we need to push our legislators to convene the SB 162 Study Committee to examine what has occurred thus far in the industry (which was the intent of the statutory creation of the committee when the last telecom bill was passed) before we take away consumers’ lifelines and/or landlines.  OPLC will be monitoring these issues in the next legislative session, and will report back with details about any new developments.

Check out OPLC’s talking points on SB 271 here.  Contact Joe Maskovyak at jmaskovyak@ohiopovertylaw.org or Mike Smalz at msmalz@ohiopovertylaw.org if you’d like more information about this or any other telecommunications deregulation issues.

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How Not to Talk About Poverty

How We Should Change Our Message and Language to Build a Movement to End Poverty

Written By Melissa Salamon, Guest Blogger, OPLC Summer Intern, and 2L at The Ohio State University Moritz College of Law

Our society continues to project an aura of negativity around the term poverty, but advocates are working hard to change the framework conceptualizing poverty in an attempt to make it a more approachable subject. To garner more support in the effort to end poverty, there is a consensus that we must change the way the public views it. There are a many tactics both organizations and individuals can engage in to improve the portrayal of poverty and its interpretation by the general public. First, we must examine what does not work, remove it from our approach, and replace it with what does work.

What doesn’t work

A number of methods have been determined to be unsuccessful in talking about poverty.  While some of these methods might sound appealing, they fail to address the causes of poverty or to propose solutions. Experts have found that addressing poverty without a framework or organizing principle which might allow it to be seen as workable or approachable is ineffective. When no framing is presented with the concept people look to their own, often negative, ideas about poverty which prevents them from seeing the true issues or supporting changes that could improve the situation.

When framework is included, it is often focused on the individual case rather than the systemic causes of poverty. This creates a sense of compassion or sympathy for the individual, but can also allow people to see the case as an exception.

Even when poverty is presented in a collective manner the concept of othering or an us/them mentality becomes an issue. The ‘War on Poverty’ terminology perpetuates othering by portraying poverty as something to fight, something that has causes outside of our society. Poverty should not be presented in a manner that invites sympathy or as a crisis that needs to be attacked.

Another method that is often used, but should be avoided, is the overreliance on data. The use of bold statistics is not recommended because it can sometimes make the situation worse. Any language that categorizes people as poor perpetuates the “othering” mentality. Stereotypes and overgeneralizations should be avoided as well as the “deserving” and “undeserving” poor dichotomy. Even making a statement about the “deserving poor” creates/validates the idea that there are “undeserving poor” and should be avoided.

Current speech surrounding poverty fails to appeal to common values in society. When creating discourse about poverty we should try to promote the idea that poverty is not an us/them issue, but a we issue. Poverty affects everyone. Economic hardship does not begin at the poverty line, but affects people from a spectrum of income levels. When talking about poverty there should be no separation of them from us; instead, we should find common uniting factors that appeal to all. Look to core beliefs and use dominant frames to positively address the issue.

So, how should we talk about poverty?

When framing poverty, try to tell a big picture story. Look to the macroeconomic causes of poverty, including unemployment and the economy, rather than the individual case or means-tested benefits issues. When talking about the War on Poverty from the 1960s, look further back to the increased unionization and the public infrastructure projects that helped decrease poverty rather than focusing on welfare.

Define the terms being used so that the concept being portrayed is not clouded by varying definitions. Use respectful, progressive, effective language. Use inclusive terms that foster the “we” concept.

Talk about the circumstances that cause behaviors rather than specific instances. Focus on solutions. Make the concept manageable and help people understand what they can do. Appeal to shared values. By making these small changes in the discourse about poverty, it may be possible to decrease the stigma surrounding it and create a common goal to eliminate poverty.

Other resources to check out:

Writing and Talking About Poverty, Dr. John McKendrick, Institute for Society and Social Justice Research, Briefing Paper 26, The Scottish Government.

Talking about Poverty in a Jobs and Economic Framework, Shawn Fremstad, September 2011, Center for Economic and Policy Research.

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School Discipline Is a Community Issue: Why People Whose Kids Are Grown or Who Don’t Have Kids Should Care About What’s Happening in Our Schools

Where did we ever get the crazy idea that in order to make children do better, first we have to make them feel worse? Think of the last time you felt humiliated or treated unfairly. Did you feel like cooperating or doing better?” 
Jane Nelson

Children “should be fully prepared to live an individual life in society, and brought up in the spirit of the ideals proclaimed in the Charter of the United Nations, and in particular the spirit of peace, dignity, tolerance, freedom, equality and solidarity.”      Convention on the Rights of the Child, Preamble

Public schools rely too heavily on exclusion – suspension and expulsion – as their primary discipline practice.  When a child or young person misbehaves or breaks a rule, “discipline” in most schools means removal of the child from school, sometimes for one day, sometimes for a year or more.  In almost every situation in which a child is removed from school, this is an illogical, counterproductive tactic.  In some situations, it is dangerous.

Children who want to avoid schoolwork, a particular teacher, a classmate, or school in general learn quickly what to do to achieve being removed from the setting they seek to avoid.  Children who have been repeatedly removed from school fall further behind the more they are removed from their classrooms.  Children who are behind have more and more trouble catching up the more frequently they are gone.  Children who are behind and not engaged in the classroom do not learn.  Children who are not learning get bored and act up.  And so on.

Children who live in high-poverty, high-crime areas are susceptible to becoming both victims and perpetrators of crime when left outside of adult supervision all day while they are not in school. Many, many parents in low-income families work multiple jobs to try to get by, lack access to child care, and cannot stay home and supervise their children when they are suspended from school.

It is not surprising, therefore, that a history of prior suspensions causes young people to drop out of school.  And that far too many young people who are pushed out of school end up in our juvenile and criminal justice systems.

This affects all of us.  Crime committed by and against young people affects our communities, both on a large and small scale.  The young people who tag my garage and break into my neighbors’ homes in my central city neighborhood have almost certainly been failed by the public school system.  And it doesn’t just affect those of us who live in urban areas, where concentrated poverty and crime, and failing schools, are endemic.  Kids are pushed out of school in suburban and rural schools, too.  Data shows that kids who are repeatedly suspended from suburban and rural schools are at higher risk of dropping out, too.  And people who live in suburban and rural communities pay the price when kids from their own small communities, as well as the urban communities in their state, are not in school.

Because they’ve been failed by their schools, young people who are not in school are more likely to become unemployed adults.  They are more likely to become recipients of public benefits like food stamps and TANF.  Young people who are not in school do not disappear.  They simply lose access to almost every legitimate means of earning a living and supporting themselves and their families.  In short,  schools’ failure to provide students a high quality education and treat them with dignity fails not just them:  it fails every person who lives and works in their community, their state, their nation.

Every person who lives in any community, therefore, has a personal interest in ensuring that every young person in that community is in school.  Removing children from school to discipline them for wrongdoing treats them as disposable, as a nuisance that we have neither the patience nor the fortitude to address.  Instead, all community members must take responsibility for ensuring that their schools teach children appropriate behavior, use discipline wisely, and exclude children from school rarely.

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Commentary: How Poverty Puts Our Democracy at Stake

By:  Sarah Biehl, Staff Attorney

The concentrations of power and wealth that we are seeing at the top and the sense of political exclusion and impossibility that we are seeing at the bottom threaten a new order that would hard to characterize as the animating ideal of our country. At the end of the day, our democracy is at stake.

–   Peter Edelman

Today I read one of the best, most poignant blog posts I’ve ever read about poverty in the United States.  In it, Peter Edelman, a law professor at Georgetown University, both promotes his new book, So Rich, So Poor: Why It’s So Hard to End Poverty in the United States, and summarizes some of his book’s main points.  I am definitely going to go out and get this book.  But, even if you don’t want to read the book, read the blog post.  In it, Professor Edelman explains very succinctly why the drive to further limit public benefits (welfare, food stamps, Medicaid, etc.) available to poor families is bad policy and harms our country.

Read it here:  How Poverty Puts Our Democracy at Stake | ACS.  And, once you’ve read, please feel free to post comments and thoughts below.  We’d love to hear what you think.

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