Star Parker

The latest installment of "change we can believe in" is sweeping reform of the financial services industry.

Central to proposed Democrat reforms is the establishment of a new Consumer Financial Protection Agency. This agency would have broad authority to oversee and regulate financial service products like mortgages and credit cards and will be responsible to protect consumers from "unfair" and "abusive" products.

Unfortunately, when bureaucrats get authority to determine what is fair, the very people who they supposedly are charged to protect -- us -- are the ones who get hurt.

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The most important product in our country is freedom and, unfortunately, it's this product that President Barack Obama and House Financial Services Chairman Barney Frank find most defective. They really think that politicians and bureaucrats can take better care of people than we can take care of ourselves.

Consider one of the most politically besieged financial services businesses in the country. Payday advance loans.

According to the website of the industry trade association, the Community Financial Services Association of America, the industry is relatively new -- it got started in the 1990's -- and now delivers about $40 billion in short term, low denomination loans.

You can't help but conclude this is a service many consumers want.

Sure, it's tough out there. Families trying to make ends meet and dealing with short-term cash flow problems is not a pretty picture. There's a lot of ways the challenges have been and are met. Bounced checks, pawnshops, bank overdraft protection, late fees on payments, informal extension agreements with creditors, etc.

Payday advance loans emerged as another way for families to deal with these challenges. And, as indicated by pretty phenomenal growth, it's clear that the product is successful.

Yet the industry is under constant attack by groups who appoint themselves to be the champions for consumer protection.

Regarding payday advance loans, their claim is that fees are too high. The business is regulated at the state level. State by state political initiatives have been advanced to put ceilings on rates loan providers can charge. Voters in Ohio last year approved capping annual rates on payday loans at 28 percent.

The result? According to one industry spokesman, "700 of the 1600 payday loan offices in the state have closed."

Star Parker

Star Parker is founder and president of CURE, the Center for Urban Renewal and Education, a 501c3 think tank which explores and promotes market based public policy to fight poverty, as well as author of the newly revised Uncle Sam's Plantation: How Big Government Enslaves America's Poor and What We Can do About It.