It might be easy to assume that the regulations on the payday lending industry are pretty clear cut between states that are controlled by Republicans or Democrats. A new study conducted by the experts at Auburn University however, seems to indicate quite the opposite. The study was completed in August of 2015 and it may change how some people perceive the regulation of the payday lending industry from one state to the next. Some folks believe that Republicans are less likely to impose stiff regulations on payday lenders, since the industry has been hounded by consumer watchdog groups for some time now. The truth this study reveals, however, may prove to eye-opening for people who believe this.
The study shows, for example, that in 8 of the 10 states that completely banned payday loans, states like North Carolina and Georgia, the Democrats were the party in charge both in the governorship and the state legislature when the laws that prohibit payday loans were put into effect. In both of the states we just mentioned – states that are now controlled by Republicans – there are efforts being made to overturn the payday lending bans.
According to a finance professor at Auburn University, named James Barth, “That probably was the only finding we comport with (the views) that some people might have thought that Democrats might be more restrictive. When you jump throughout the entire country, you find no significant relationships between the stringency of payday lending (and political party affiliation in control of state government).”
The same study that was conducted last year found that there was a direct relationship between the total number of payday lending locations that were located near less educated and financially vulnerable communities. The study also seemed to indicate that property crimes happened at a lower frequency in areas where payday loans are legal. The president of Borrow Smart Alabama, a title loan and lending location in Birmingham, said that he was surprised to read the findings, as Democrats are usually seen as being more hard lined when compared to their Republican counterparts. This study showed that of 30 states where either Republicans or Democrats were in control of both the state legislature and governorship, only five of the states prohibited payday loans. Of those five states, four of them are currently under Republican control.
In 25 states which allow payday lending and which have governmental control under a single party, the regulatory stringency seems to vary quite a bit across those same states, according to the report.
Here’s an example: In California, a democrat controlled state if ever there was one, the maximum APR that short term lenders can charge for a two week, $100 loan is calculated to be 456 percent. The same stats apply when looking at Alabama; a state that is controlled by the Republican majority. The caps on loans in California are set at $300, while the caps in Alabama top off at $500. By way of comparison, though, the cap in Oregon – a Democrat controlled state – is a whopping $30,000
Caps on a maximum loan amounts in Alabama are $500, whereas California is $300. But Oregon, controlled by Democrats, has a cap of $30,000.
So, while it may be easy to see everything through the lens of the party that you choose to support, it appears that the statistics prove that things are pretty much evenly divided amongst the parties when it comes to regulations on the payday lending industry. There has even been across-the-aisle movements popping up in recent months that show members of both parties are doing what they can to crack down on the newly proposed regulations that have been drafted by the Consumer Financial Protection Bureau.