Banking and the U.S. Moral Economy

At this time of widespread economic crisis when many families are experiencing financial hardship, consumer advocates are calling on regulators to prevent banks and tax preparers from making usurious refund anticipation loans which take a big bite out of low-income people’s tax refunds.

The California Reinvestment Coalition joins 30 consumer groups nationwide at a hearing on Thursday testifying before the Office of Thrift Supervision to oppose Republic Bank’s application for a charter in order to merge with Republic Bank & Trust Company.

Republic is one of the nation’s top providers of refund anticipation loans (RAL). The Kentucky-based bank charges the most expensive RAL fees of any lender, ranging from $34 to $125 and amounting to an APR of at least 161%. For a typical refund of $2,600, a RAL borrower at Republic pays a $110 loan fee. That doesn’t include a $30.95 fee to set up an account, another $30.95 for electronic deposit, and any tax preparation and filing fees.

California Progressive Report, Banks Target the Working Poor During Fiscal Crisis, Kevin Stein, Associate Director, California Reinvestment Coalition

Here’s another example of the stark depletion of the U.S. moral economy, much of it rooted in unquestioned conservative economic principles. Certain ideas just don’t come up in debate very often, almost as if they were taboo. Criticism of usury is a good example, despite the recent attempts to reform credit card laws. What’s shocking is what is so un-shocking.

In fact, the reforms just seem to have prompted the credit card companies to find other ways to rip us off. And, of course, the new rules and regulations don’t cap or in any fashion limit how much interest can be charged. That’s why these workplace loan sharks are so astonishing; they’ve pushed usury almost to its logical limit, often charging effective annual rates of several hundred percent.

You would think that this would simply be a crime that no one would question anymore than anyone questions any other sort of theft or confidence game. After years of propaganda against government regulation and a religious market idolatry, though, we seem incapable of seeing these sorts of crimes as problems, much less as crimes. Let the buyer beware has become a license to steal.