The State Legislative Process: It’s no Fun Watching Sausage Being Made

In a recent trip to testify before a state legislature, I was reminded of why one might want to avoid these types of interactions. First, it is no fun, second, is not required as a condition of my employment, and third, at least so far, no good ever comes of it.

I was there to support a consumer protection bill regulating disclosures and interest rate caps on refund appreciation loans (“RALs”). I know what you are thinking. Didn’t RAL providers go out of business when the IRS stopped providing lenders access to its debt indicator underwriting tools? Not all of them. RALS are still very common in Indian Country, for example.

A member of the Committee before which I appeared announced pretty early on in the hearing that interest rate caps were not favored, and then a person from the state department that would be charged with regulating the RAL industry under the new law said their department did not have the resources to regulate the industry. This seemed to really resonate with the Committee as it meant that the law was not completely revenue neutral. Hmmm…does this mean that anyone is allowed to do whatever they like around here?

I also watched proceedings on another consumer protection bill that proposed prohibiting the use of credit checks by most employers until after the interviewee had made it past the initial screening process. In the context of the hearing on this bill, there were quite a few comments made about how the credit report and score might be the only objective evidence an employer has about a potential employee.

I was left wondering if leaving these matters up to states is all that effective, as well as with a few question for our esteemed readers, none of which is rhetorical:

1. Why is it that some states are all in favor of interest rate caps, including some red states like Montana and Arizona, whereas “cap” is almost a swear word in other states, even some democratic ones?

2. Is “regulating this will cost money” a good excuse in your state for not protecting consumers?

3. Finally, do you think that credit reports and scores are an objective measure of a future employee’s potential?

Just wondering….