W&L Law Symposium to Look at Financial Services on the Fringe
The economic downturn and banking system overhaul have led to a boom in so-called “payday” loans, short-term, high-interest loans that help tide borrowers over between paychecks. As reported recently by the Wall Street Journal, shares in companies that provide these services have jumped in recent weeks as even more consumers have been turned away from traditional lending sources.
Financial services like these are the focus of an upcoming symposium on Nov. 10-11 at Washington and Lee School of Law in Lexington, Va. In addition to payday loans, participants will examine auto title loans, for-profit college loans, and refund anticipation loans. Legal scholars, economists and lending company representatives will also explore emerging regulatory efforts, as both states and the federal government are poised to intervene in the fringe credit market to protect consumers from what some see as a predatory business practices.
The symposium, titled “Regulation in the Fringe Economy,” will take place in the Millhiser Moot Court Room, Sydney Lewis Hall. A full schedule and registration information is available at law.wlu.edu/fringe. The symposium is free and open to the public. Virginia CLE credit is available.
Margaret Howard, a Washington and Lee law professor and bankruptcy expert who will moderate one of the symposium panels, notes that loans of any kind are hard to get right now from a bank.
“If you want a short-term loan, there’s no easy way to get one from a regular bank,” says Howard. “So there is a market for these loans, and if there were no market, these businesses would dry up of their own accord. But it is an extremely expensive way to borrow money. Ten dollars a week doesn’t sound like much, but when you add the percentage rate up over a year, it can be staggering.”
Participants in the symposium will also look at the growth in private loans for education, especially for-profit colleges. A recent report from the U.S. Department of Education’s National Center for Education Statistics showed that between 2004 and 2008, private loans directed at for-profit colleges grew nearly 30% and private loans for private nonprofit colleges increased 14%. The report noted also that fewer than half of those who utilized private loans had borrowed the maximum from federal loan programs, which offer better rates than private lenders.
“There is a question here about whether consumers who use these devices have all the information they need to make the best choice,” adds Howard. “We’ve seen this in the mortgage industry, where people who could have qualified for a traditional mortgage were pressed into high-risk mortgages because agents would get better commissions.”
States across the country are responding to consumers’ use of these products, but in very different ways. Some states have banned these businesses altogether while others have embraced them with little or no regulations. The federal government is also responding, poised to intervene into fringe credit markets for the first time through the newly created Consumer Financial Protection Bureau.
The symposium is sponsored by the Washington and Lee Law Review, the Frances Lewis Law Center, Consumer Credit Research Foundation, The Washington and Lee Class of 1963 Scholar-in-Residence Fund, and the National Conference of Bankruptcy Judges.*
*In partially funding the project, the Endowment does not endorse or express any opinion about the approach used by the project, or any conclusions, opinions, or report of any research results expressed in or disseminated by the project.
School of Law Director of Communications