On November 10th and 11th, the Washington and Lee Law Review, sponsored the “Regulation in the Fringe Economy” symposium at the Washington and Lee School of Law. The symposium was co-sponsored by the Frances Lewis Law Center, the Consumer Credit Research Foundation, the Washington and Lee Class of 1963 Scholar-in-Residence Fund, and the National Conference of Bankruptcy Judges Endowment for Education.
The symposium focused on lenders dealing in the fringes of the economy – payday loans, auto title loans, rent-to-own stores, and for-profit college loans. With the economy in shambles, more and more people have turned to these lenders and services rather than traditional, mainstream financial service providers. This trend and how to response was the primary topic of the renowned scholars in attendance.
The first panel, moderated by Bruce Miller, discussed mainstream ideas about fringe lending and regulation. Professor Robert Mayer addressed loan sharking and the effect of interest caps on their prevalence. Professor Lance McMillian used the lens of HBO’s The Wire to discover that regulation is superior to prohibition for inevitable markets. Professor Todd Zywicki discussed the rise of overdraft protection and the data surrounding it.
Professor Ronald Mann of the Columbia Law School gave the keynote address. Prof. Mann set a measured tone for the symposium by discussing the arguments that exist on both sides of the issue. He contrasted the paternalistic approach of regulation and consumer protection with the rational decisions consumers make regarding fringe lenders.
The second panel, moderated by Hilary Miller, addressed whether payday lenders should be regulated and the best way to do so. Jay Speer discussed the predatory lending practices he has witnessed as Director of the Virginia Poverty Law Center and promoted heightened regulation. William Webster, Chairman of Advance America, argued that payday loans are a valuable service for short-term, small-dollar customers and that excessive regulation would leave consumers worse off. Professor Paige Marta Skiba analyzed consumer behavior and concluded that many regulations considered are ineffective in protecting consumers. Professor Christopher Peterson addressed the problems with regulation enforcement to date and proposed a mandatory warning sign for all vendors charging an annual percentage rate above 45%.
The third panel, moderated by W&L’s own Professor Margaret Howard, discussed what future issues may arise in the fringe economy. Professor Jean Braucher raised the issue of for-profit college loans and the ability for students to pay their debts after graduation. Professors Eric Chaffee and Geoffrey Rapp talked about peer-to-peer lending, the practice where debtors borrow from a collection of their peers rather than a bank or institution. Professor Nathalie Martin addressed internet-based payday lending and the use of tribal immunity to skirt consumer protection laws.
The last panel, moderated by Professor Harlan Beckley of W&L, covered empirical data about fringe lending and some of the federal measures enacted. Professor Creola Johnson covered the Military Lending Act’s 36% cap on consumer loans for military members and the power of the newly-created Consumer Financial Protection Board. Professor Rich Hynes analyzed the data behind common criticisms of the payday lending industry. His results overall were inconclusive, acknowledging the complexity of the issue. Professor Alan White used examples in microcredit programs to highlight regulation suggestions for the small-loan credit industry. Professor Jim Hawkins presented data he gathered about the auto title industry and how consumers view them.
The symposium overall was a great success, highlighting many of the discussions regarding the fringe economy. It fostered a tense, but productive discourse between consumer protection advocates, academics, and industry representatives.