Study Says Political Parties Will Regulate Bad Credit Loan Lenders

The common perception in the United States is that Democratically-led states are more likely to regulate, or in some cases, prohibit payday loans. The other prevalent concept is that Republican-led states are less likely to regulate and reform payday loans.

One study released Tuesday suggests that both premises are false, and both parties are likely to regulate the much reviled industry of payday loans.

According to a study conducted by Auburn University, there is no evidence to suggest that Republicans are more lenient than Democrats when it comes to bad credit loan lending business. Essentially, the study contends that supposed pro-business Republican lawmakers are just as likely as their Democratic counterparts to institute regulations against payday loan lenders.

However, researchers say that in eight of the 10 states where payday loan lending is banned, like Georgia and North Carolina, Democrats were in charge of the legislature and governorship. In the aforementioned states, where there are Republican majorities, there are initiatives to overturn the bans.

“That probably was the only finding we comport with (the views) that some people might have thought that Democrats might be more restrictive,” said James Barth, a finance professor at Auburn University, in a statement. “When you jump throughout the entire country, you find no significant relationships between the stringency of payday lending (and political party affiliation in control of state government).”

With that being said, of the 30 states where the GOP or the Democrats control both the governorship and house, only five have banned payday lending. And of those five states, four are controlled by the Republicans.

Moreover, in 25 states where bad credit loan lending is perfectly legal and the government is in the control of one specific party, the number of regulations vary from state to state.
To show how there isn’t much difference between the two parties, there was a finding that Democrats in Alabama were a lot more understanding to the needs and demands of the payday loan industry.

Republican State Rep. Danny Garrett told that the reason for this is because it’s a bipartisan issue.

“I think it really is a bipartisan issue,” Garrett said. “A lot of Democrats or Republicans who have any business sense realize that it’s not a finance model that works. You wouldn’t advise your mother or father or anyone to get into a loan you can’t pay back.”

Max Wood, president of Borrow Smart Alabama and operator of a title loan and express cash shop in Birmingham, said that Alabama Republicans would actually be more likely to ban this type of business because they don’t understand the need.

“We were totally surprised by that. You would think they would support pro-business and they didn’t seem to want to hear that,” explained Wood. “They don’t understand the needs for (alternative financial institutions).”

States all over the country are proposing and debating legislation of reforming the payday loan industry through the means of capping interests, limiting the amounts customers can borrow and restricting loan cycles. Thus far, there is bipartisan support, and the only sort of opposition is coming from the payday lenders themselves.

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