Payday loan legislation out of Florida
Democrats and Republicans constantly have heated debates regarding new legislation, party issues, and everything in between. While this seems to be the norm, there is one issue that both parties seem to have agreed upon: payday loans. You read that correctly. Legislators are taking aim at payday loans and they do not seem to have the consumer’s best interests at heart.
What is the legislation?
The legislation was introduced by Florida Congressman Dennis Ross and has been somewhat ironically named the Consumer Protection and Choice Act. The Act is being backed by the Chair of the Democratic National Committee, Debbie Wasserman-Schultz; also from Florida. The Act was drafted in response to the Consumer Financial Protection Bureau’s plan to create a set of rules intended to curb the more contemptible aspects of payday lending (hefty fees, sky high interest rates, and not enough time to repay the loan).
Wasserman-Schultz and Ross both want Florida to be the model by which all other states will follow. The problem is that Florida’s payday lending rules are not the ideal paradigm. The CFPB wanted to institute a set of rules that would protect the consumer by offering debt trap prevention and protection. The new bill falls short in some of the areas the CFPB wanted to cover. This was true not only for payday loans, but also for any credit product that requires consumers to pay back the loan in full within 45 days, so it would include deposit advance products, some vehicle title loans, and certain open-ended lines of credit.
That’s a good thing, right?
Well, it would be; except, the CFPB has yet to release its draft of rules. The proposed bill, would not only delay the CFPB’s efforts to structure payday lending, but would also exempt states with existing restrictions on payday lending. This is a huge problem for the consumer. The existing bill does not structure fees or interest in the way that the CFPB wanted to do. This is not good for small business owners and entrepreneurs. Often, entrepreneurs need these untraditional loans between paydays to make ends meet. This bill does not protect the consumer and you need to be aware of the pitfalls.
Why this matters
According to The Consumerist (via Huffington Post), in December, a letter [PDF] was sent to all members of Congress, along with members of the Consumer’s Union, noting that “in spite of the industry-backed Florida law, 88% of repeat loans were made before the borrower’s next paycheck,” and 85% of payday loans are issues to people who have taken out at least seven loans per year.
The Huffington Post cites data from Pew Charitable Trusts, stating the typical Florida payday borrower takes out nine loans in a year, and spends about six months of the year in debt. Pew calculated the average APR on Florida payday loans at 304%, not much of an improvement on the national average (where payday loans are allowed) of 390%. This is the model by which all other states will conform, if the bill passes. This doesn’t seem like much protection for the consumer.
Due to high interest rates and small amount of time to pay back the loan, borrowers are continually in debt (a no-win situation for small businesses using this loan method to survive).
California’s gig labor bill hurts the people it’s trying to protect
(POLITICS) The law has loopholes for industries with good lobbyists, but it’s costing independent contractors, freelancers, and creatives their jobs.
So, there’s a new bill in California, Assembly Bill 5, that’s doing immense harm to freelancers across the state and throughout the country. The bill was intended to prevent tech companies from taking advantage of their employees by branding them as freelancers. But the thing took too wild a swing, and a lot of people have gotten hit by it.
We’re going to talk about how and why, but let’s get one thing straight, right off the bat:
We absolutely need something to help workers in this country. When we talk about why AB5 doesn’t work, I want to be very clear that I’m not turning my nose up at the idea of something like it. Rather, it’s this specific law that’s hurting a lot of people.
Let’s take a quick review at the environment that gave rise to Assembly Bill 5:
We live in an incredibly rough economy for most people. The stock market is doing phenomenally! But the stock market isn’t the same thing as the economy. The economy is made of people who are barely getting by, propping up a class of billionaires who are hording an amount of wealth that is increasing at a mind-boggling pace, instead of “trickling down”.
Productivity and wages used to rise together, but they got divorced in the 70s, and productivity’s been doing a lot for herself while wages have just sort of lazed around on the sofa, getting drunk. Productivity has grown 6 times more than pay since 1979. In the last ten years, the costs of education, housing, and medical care have ballooned, while the minimum wage has held steady at $7.25/hour. Not only is this financial climate hard for the average American, it’s going to be hard for a LOT of people, when the purchasing power of the middle class dwindles away to nothing and the bottom drops out of the whole contraption.
And there’s plenty of room for it to keep dropping! Because it turns out that a LOT of tech’s “innovation” just means “circumventing labor laws in ways that nobody’s made illegal yet”. Sometimes the tech world finds cools ways to get money and opportunities to people. Think of crowdfunding, or subscription services like Patreon that let middle-class artists do their thing sustainably.
But often, you instead wind up with companies like Uber, Lyft, and Favor. Rideshare apps view their drivers several different ways. They tell the government that they’re independent contractors. Drivers often claim that they’re running a small business, with the rideshare app’s help. Internally, (and to the SEC) they think of their drivers as the customers. The people who call for rides aren’t the customers—they’re the product that the app delivers to their customer, the driver.
What all of this means is that rideshare companies don’t have to pay minimum wage. They don’t have to offer benefits, like time off or healthcare. If the people who work for you are your customers, instead of your employees, you don’t have to take care of them the same way. (Funny how that works out, right?)
And in some ways, I can see the temptation to do things this way. Insurance is expensive, and it’s kind of wild that we make employers pay for it. Somehow saddling small businesses with that expense is considered the “conservative” option; I’ll never understand how that’s supposed to be good for the market. We’re the wealthiest nation in the world, and yet we’re just about the only country that puts the burden of healthcare on business owners instead of the government.
But here’s the thing: That’s how health care works in this country! It’s what we have. We have a public option, technically. But it’s been systematically gutted to the point of uselessness, intentionally, by people who resent it being passed in the first place. So until we get some kind of national healthcare system, it’s on business owners to make sure that their employees don’t die because they can’t afford medical care. That’s the law, and that’s the ethical thing to do in our current situation.
And tech companies tend not to like that. So we get situations like Uber, where people who are clearly employees are being framed as literally anything else. Because the companies hiring them would rather burn millions trying to render their employees obsolete than spend that money keeping them alive. (Fun side note: Remember when one of those self-driving cars killed a woman because Uber forgot to tell their AI that humans can exist outside of crosswalks?)
And just like I understand why companies would try to dodge those costs (even if it’s clearly wrong), I also understand what AB5 was trying to do. They’re trying to close that loophole. They’re trying to stop companies from BSing about who is an employee and who isn’t. That makes sense.
So the bill defines freelancers with help from a court case, Dynamex Operations West, Inc. v. Superior Court (2018). The main features are
1. Is the worker free from the control and direction of the hiring entity. Is the person who hired them telling them where, how, or when to do the work?
2. Is the work being performed outside of the normal course of business for the hiring entity?
3. Is this work that the worker normally does, independently of this one business relationship? Do they genuinely have their own business in this field? Or is this “freelancing” something they’re just doing for one company?
You can immediately see some huge questions raised here. Among them:
– How strict do you define “telling someone how to do their work?” Because I’ve never had a creative assignment that didn’t come with some sort of deadline, right?
– How do you define “the normal course of business?” The normal course of business for a magazine involves hiring dozens of writers to write hundreds of pieces. Does that stable of writers suddenly get smaller if you can’t afford to give them all benefits?
And we’re already seeing fallout from this. Large multimedia platforms, from Vox to CollegeHumor, are laying off huge swaths of their staffs. Under the new law, writers aren’t allowed to submit more than 35 pieces in a year and still be considered freelancers. That means that these outlets were going to have to either cast a much wider net for their bullpens, or cut their staff and focus on a core group of (presumably grotesquely-overworked) people. Unsurprisingly, they chose the latter pretty universally.
And it’s not just writers. Musicians are getting hit, too. A petition to secure an exemption is nearing 50,000 signatures on change.org. Any creative endeavor other than “a day job with a desk at Disney” is going to involve a network of people floating in and out as projects start and end. There’s a lot of room for exploitation, and there’s a lot of room for quashing that exploitation. But right now, this bill is mostly just putting people out of work.
And just like California’s (much-needed, fantastic) privacy protection laws are having an impact across the country, (because you never know if the data you’re collecting is on a Californian!) so too is their (terrible) freelancing law rippling out. Because work doesn’t happen in offices anymore. It happens everywhere. I recently released a song with musicians from six countries performing on it. That wasn’t even something I was trying to do. That’s just where my friends were!
Now, my piece was just me getting together with some friends to have fun. But professional recordings happen that way, too, all the time. And right now, if the person on either the hiring or performing side of that equation is in California, that relationship is in jeopardy.
And of course, the really fun thing is, that a lot of the industries that were intended as targets of the bill are sidestepping it with court challenges. And many industries lobbied for exemptions, meaning that real estate agents, CPAs, lawyers, surgeons, referral agencies, and lots of others were exempt from the get-go.
So what we’re left with is a law that’s meant to protect people. But many of the people it should’ve protected aren’t covered by it. And many legitimate freelancers are getting screwed out of business relationships that they used to rely on. The big publications that they used as cash cows to pay their bills are either capping them at 35 articles, or letting them go altogether. It’s not hard to see that this is wildly misguided, and that it’s causing more harm than help. We’ve got to pump the brakes on AB5 and try to figure something else out.
How USMCA is different than NAFTA and if/when it will finally be passed
(POLITICS) The USMCA should be set to replace NAFTA early in the year, which will help small business and real estate alike with easier trade.
The United States-Mexico-Canada Agreement (USMCA), which has been a priority for President Trump, is one step closer to replacing NAFTA. Amid the impeachment hearings, the House of Representatives passed the USMCA by a vote of 385-41. The Senate must still approve the agreement, but according to CNBC, once the Senate gets back in session in January 2020, the agreement will pass.
The USMCA is a renegotiation of the North American Free Trade Agreement (NAFTA). It was informally agreed upon by President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto in 2018. However, each country’s legislature must approve the agreement before it is ratified. Mexico’s legislature has ratified the agreement, but Canada has not. It is anticipated that the agreement will be re-introduced to the Canadian Parliament this session.
What’s the difference between USMCA and NAFTA?
NAFTA was created to reduce restrictions on trade between Mexico, Canada and the United States. It was to increase market access and investments between the North American countries. President Trump has referred to NAFTA as “the worst trade deal ever made.” The USMCA builds on NAFTA, but does alter some of the provisions. It’s unknown when the agreement will go into effect. Canada has not ratified the agreement.
How will the USMCA affect small businesses?
The official text of the USMCA hasn’t been released, but we do know a few of the provisions. The biggest impact for businesses may be in the automobile industry. Under USMCA, 75% of auto components must be manufactured in Mexico, U.S. or Canada to be eligible for zero tariffs. Under NAFTA, the figure was 62.5%. In addition, by 2023, 40% of workers who assemble cars or trucks must make at least $16/hour.
The USMCA reduces the timeline for brand-name biologic prescription drugs to be produced as generics. Some popular biologics include Humira, Lantus and Botox. Another key component of the agreement is opening the Canada dairy market. US farmers can now export up to 3.6% of Canada’s dairy market. The National Association of Realtors® (NAR) supports the USMCA because it will make it easier for real estate investors to travel between the countries.
Although the USMCA is not in effect yet, it does seem likely that it will be ratified this year to provide more opportunities between Canada, Mexico and the United States.
FFEE Act wants to save you from having to pay to freeze your credit
(POLITICS NEWS) The FFEE Act wants to help give consumers more rights more control over how credit agencies use their data.
Following the compromise of consumer data from credit reporting bureau Equifax, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) have introduced the Freedom From Equifax Exploitation (FFEE) Act.
This act aims to give consumers more rights more control over how credit agencies use their data.
The bill is available here, but here is a few of the bill’s highlights:
- Create a uniform, federal process for obtaining and lifting a credit freeze.
- Preventing credit reporting agencies from profiting off the use of consumer information for the duration of a credit freeze;
- Strengthening the fraud alert protection from 90 days to a one year, with a year renewable.
- In ID theft cases, a 7 year fraud alert is created.
- Require any credit reporting agency who charged a fee to freeze credit in response to the data breach to refund those fees,
- Allow for an additional free credit report (consumers already get one under the Fair Credit Reporting Act through annualcreditreport.com)
The most important feature here is the removal of any fee to freeze your credit. Currently, agencies like Equifax charge nominal fees to freeze credit (anywhere from 3-10) dollars. If this bill passes – not only will that service be free, but it will restrict the way credit agencies use that information while the freeze is active.
The idea behind making this free also keeps credit companies, whom many believe are responsible for the security of credit information, from profiting off information breaches. Given that many financial advisors have advised those impacted to freeze their credit, this would be a benefit to consumers.
It is important to note here that Equifax has suspended the fees to freeze credit for the next month.
A credit freeze restricts access to your credit report. Simply put, it requires the credit agency to contact you first to ensure it was you who applied for credit, thus making it harder for you to apply for credit. You would need to unfreeze your account to apply for new credit. You must also freeze credit with each bureau, which can lead to some expenses as you must pay anytime to lift a freeze.
Remember: a credit freeze doesn’t impact current accounts or your credit score. If you apply for credit often, or open new accounts often, then a credit freeze may not be for you.
Lots of names
The bill has several original co-sponsors, including Senators Sanders, Franken, and Blumenthal. Companies like the National Consumer Law Center, Americans for Financial Reform, CREDO, and the Consumer Federation of America all have also endorsed the bill.
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