Wednesday, March 26, 2014

Wednesday, March 26, 2014

Push to prevent predatory lending continues; LBP on LPB tonight; Cigarette use often breaks along class lines; Deadline for health insurance enrollment extended for some; and Airlines excel in tax dodging. 80—Percent of payday loans that lead to an additional loan within 14 days (Source: CFPB)

Push to prevent predatory lending continues
Sen. Ben Nevers announced a new effort to curb predatory payday lending practices yesterday —removing the exemption the industry currently has from Louisiana’s loansharking law, reports the Advocate. Payday lenders routinely make short-term, small dollar loans to families that are in a financial crunch at annual percentage rates (APRs) that can be as high as 500 and 600 percent. With such high rates, consumers become trapped in a cycle of debt, taking out one payday loan to pay off another. But Louisiana’s statute against loansharking makes it a felony to make loans with APRs higher than 45 percent. So how can payday lenders still operate? The answer: a special exemption for the payday loan industry.

Also yesterday, the Consumer Financial Protection Bureau (CFPB) released a report confirming that the majority of people who take out a payday loan get trapped in the debt cycle, reported the Wall Street Journal’s Marketwatch. Despite claims from the industry that most users do not fall into the debt trap, the CFPB found that more than 80 percent of payday loans are followed by an additional loan within 14 days, and that 15 percent of new loans are the beginning of a cycle that stretches at least ten loans long.

Recognizing the damaging effects of predatory lending on communities in Louisiana, the editorial boards of the Shreveport Times and Times-Picayune this week joined the chorus in favor of reform.

LBP on LPB tonight
Louisiana Budget Project’s David Gray and Jan Moller will be featured tonight on Louisiana Public Broadcasting’s Public Square, 7 p.m. on LPB and 9 p.m. on WLAE. The show will repeat at 1 p.m. Sunday. For those who prefer a more on-demand experience, the show will also be available online. Jan and David will talk about the benefits for Louisiana’s families and economy if the state raised the minimum wage.

Cigarette use often breaks along class lines
The New York Times highlighted a new federal report on smoking that measured county (otherwise known as a parish, if you are lucky enough to live in Louisiana) level trends from 1996 to 2012, which showed that while the habit has declined steadily in wealthier and urban counties, it has remained stubbornly entrenched in more working class and rural parts of the country. Of note, East Carroll Parish in the Delta region — one of the poorest parishes in Louisiana — has the 9th highest smoking rate among men of all 3,127 counties in the country. Slightly less than four in ten men in the parish are smokers.

Disparities in tobacco use in turn negatively impact health outcomes like cancer mortality. The issue is especially important in a low-wage, high-poverty state like Louisiana, where one in five adults smokes — a rate above the national average. The problem is compounded by a large number of uninsured adults and limited access to health services like smoking cessation, as well as by low cigarette taxes that make picking up the habit all too affordable for many Louisiana teenagers. Experience in other states has shown that hikes in tobacco taxes decreases use among adults, deter first-time smokers, and can raise revenue for public health programs — a win, win, win.

Unfortunately, an effort to increase tobacco taxes last session failed to move due to opposition from Gov. Bobby Jindal and many legislators who have drawn a line in the sand against discussing any new revenues — regardless of the immense health benefits for smokers and teenagers.

Deadline for health insurance enrollment extended for some
The Obama administration has extended the deadline for enrolling in health coverage for people who have not been able to complete the process due to technical or other problems, reports the Washington Post. The extension only applies to people who start the application process before the original deadline of March 31 — akin to allowing people to vote as long as they are in line when the polls close.

Airlines excel in tax dodging
From Time magazine comes the bizarre story of an American Airlines’ subsidiary with a one-room office that is rarely occupied and apparently lacks a basic computer located in the hamlet of Sycamore, Ill. — more than an hour away from Chicago O’Hare airport operations. The airline uses the subsidiary to avoid paying certain sales taxes on jet fuel. The Regional Transportation Authority, which runs public transit in Chicago, is suing to recover the lost taxes, accusing the subsidiary of being a “sham” company. United Airlines has been sued by the RTA for a similar scheme. For more, check out this video that explains how the tax dodge works.

80—Percent of payday loans that lead to an additional loan within 14 days (Source: CFPB)