Federal government revises restrictions on payday loans, a call to the pot, and a better way to pay property taxes


Is the new federal crackdown on payday loans suspended?

Acting Director of the Consumer Financial Protection Bureau Mick Mulvaney appears to be doing exactly what consumer groups feared he would do: reverse historic payday lending regulations.

This week, Mulvaney announced a plan to review a recent rule requiring payday and car title lenders to verify key information about potential borrowers, including whether they can afford the loan repayments. It is expected to come into force in 2019.

Consumer protection groups such as the Center for Responsible Lending (CRL) had hailed the rule as an important step towards reducing loans that can trap low-income borrowers in a cycle of debt. The Stop the Debt Trap Coalition noted that it was published after years of research and many contributions from stakeholders.

In an email to GoverningDiane Standaert of CRL warned that “this week’s announcement is a signal that Mulvaney may be trying to make life easier for payday loan loan sharks at the expense of consumers.”

Takeaway meals: When President Trump appointed Mulvaney to the post in November, it sparked near hysteria among consumer groups who felt he would undermine the agency’s mission. So far, those fears seem to be playing out – Mulvaney is also asking that the office not receive any new funding – and state attorneys general could lose their federal consumer ally. Still, it’s important to remember that the most powerful tool against payday lending – setting interest rate caps – remains in the hands of states.

Already, 15 states and the District of Columbia cap interest rates at 36%. Standaert would like to see more states do so. She noted that the payday industry is “aggressively” pushing bills in Florida and Indiana to allow long-term loans with interest rates up to 200% APR, in addition to short-term loans. term at a rate of 300% that they are already granting in these states. “States can and should follow the example of the 15 States plus the District of Columbia [in preventing] the harms of the payday loan debt trap, ”she said.

Cash on the pot

A bipartisan coalition of 19 attorneys general is urging Congress to change federal banking laws that prevent legal marijuana companies in their states from having bank accounts. Federal law currently prevents banks and other deposit-taking institutions from providing financial services to marijuana businesses, even in the 29 states and the District of Columbia where these businesses are legal and regulated.

In a letter sent this week to House and Senate leaders, the GAs urged them to propose safe harbor legislation for banks. “It would bring billions of dollars to the banking industry and give law enforcement the ability to monitor these transactions,” they said. “In addition, compliance with tax requirements would be simpler and easier to enforce with more clearly defined monitoring of funds. This in turn would result in increased tax revenue. “

Signatories to the letter included Attorneys General from Alaska, California, Colorado, Connecticut, Guam, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, from New Mexico, New York, North Dakota, Oregon, Pennsylvania, Vermont and Washington.

Takeaway meals: The unbanked nature of the marijuana businesses in the states creates not only tax and income issues, but public safety issues as well, as owners move large amounts of money to pay their bills. The recent repeal by the US Department of Justice of the Obama-era guidelines describing how financial institutions could provide services to state-licensed marijuana businesses under federal law exacerbates the conflict between the state and the federal government on the matter. The rescinding of the directives, according to the attorneys general, made the need for congressional action to transfer the liquidity generated by this industry into a regulated banking sector even more urgent.

This issue will become increasingly problematic as more states consider legalizing recreational marijuana. At least four other states could do so this year: Arizona, Michigan, New Jersey and Vermont.

A better way to do property taxes

Localities typically charge homeowners once or twice a year for their property taxes. But what if, like most of the bills we get, they send a monthly bill instead? This would improve the fiscal health of local governments and may even generate greater political support for the tax, according to a new report.

The Lincoln Institute of Land Policy report found that while many homeowners have the option of paying property taxes monthly as part of their mortgage, less than half do. The author of the report, Adam Langley, senior research analyst, says the high lump sum payment method not only increases the rate of property tax delinquency, but “is also likely to foster political opposition to the tax. land tenure and lead to policies that erode municipal taxes. health.”

To back up his findings, Langley points to Milwaukee, where every homeowner can pay property taxes in monthly installments. “As a result,” Langley writes, “homeowners are five to 10 times more likely to make monthly payments than in cities and counties that require prepayment requests.”

Takeaway meals: Paying your property tax twice a year isn’t just a problem for homeowners. Property taxes are one of the main sources of government revenue. Receiving payments only once or twice a year means cities and counties have to resort to short-term borrowing or hold large amounts of unused money to meet payroll and other regular expenses. .

The report recommends that states change laws to allow monthly property tax payments and that local governments automatically offer the option to homeowners. Currently, only 16 states allow localities to establish such programs, but few actually do. Langley also suggests including an automated payment option for taxpayers and considering shared service agreements with other governments to reduce the cost of collecting taxes.

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