Pluralistic: 29 Jan 2022

Today's links

The window of a payday lender, advertising 'No credit checks,' 'Same-day service,' 'Fast friendly service' and '$50-$500.'

No, payday lenders aren't nice guys (permalink)

"It is difficult to get a man to understand something when his salary depends upon his not understanding it." That quote from Upton Sinclair reveals the ideological underpinnings of consequential errors by economists that lead to material, negative consequences for poor people.

Here's one of those errors. A pair of economists, one associated with the the far-right Scalia Center at George Mason University, performed a deeply flawed analysis of payday lenders that concluded that, far from being loan-sharks, payday lenders are good-natured slobs who offer generous terms to desperate, poor people.

Specifically, the researchers claimed that payday lenders routinely charge lower fees and interest rates than state law permits, offering discounts to borrowers with nowhere else to go. The researchers were dead wrong.

As Adam Levitin writes on Credit Slips, the researchers committed a basic, fundamental error in their analysis: they assumed that the state caps on payday loans under $100 were the same as the caps on larger loans. In reality, most states impose higher caps on higher-value loans. The reason payday lenders don't charge as much on those loans is that they're not allowed to.

Now, it's possible that this is just one of those mistakes that we all make – after all, pobody's nerfect. But this is a mistake that supports an ideological position: the position that markets are efficient, that lenders are performing a public service, and that regulation interferes with the market's capacity to reach efficient equilibria.

Payday lenders have a well-deserved reputation for abusive and predatory practices. Any self-respecting Bayesian thinker whose research concluded that an industry with a long history of regulatory capture, falsifying data about its practices, and ruining peoples lives was actually remarkably generous should go back to the data and triple-check before publishing.

I mean, payday lenders are really bad. Their 300% APR loans trap poor people in a cycle of constantly rolling over their debts, creating unpayable, mounting debts that lead to ruin.

They have a long history of paying researchers to falsify the data about their conduct to sanitize it:

They openly bribed Trump in a bid to remove the minimal regulation on their industry, turning millions in bribes into billions in profits:

The Trump administration loved usury. First, it killed the regulation on payday lenders:

Then it got rid of the remaining regulations under cover of providing aid to poor people who lost their jobs to covid:

Today, Biden's Consumer Finance Protection Bureau is taking the first steps toward reining in payday lenders with rules requiring fair disclosures and interest rate caps to prevent inescapable, spiraling debt-traps. And the authors of this flawed research took to the pages of the WSJ to condemn the CFPB's plans, citing their flawed paper as evidence that payday lenders don't need external controls on their businesses.

"Once is happenstance, twice is coincidence, the third time it's enemy action." There's a difference between making a gross coding oversight in a research paper, failing to exercise the commonsense that would have surfaced that oversight, and weaponizing the incorrect conclusions to support a predatory industry.

Levitin's analysis of the paper is scorching. The authors didn't just make a coding error in their data, and didn't merely mobilize the resulting erroneous conclusion to support a corrupt and predatory industry – they also published their data in a way that makes it impossible to verify their conclusions.

Levitin calls for the paper to be withdrawn and for the WSJ to publish a correction. At the same time, he's somewhat sympathetic to the authors, pointing out that "calculating usury caps is not always an easy thing." He should know: he wrote the definitive text on consumer finance and included pages of exercises on this to help students avoid falling into the same errors:

But he doesn't bend over backwards for them. As he writes, there's a "[troubling] lack of discussion in the paper of the most obvious distinction in patterns on a state-based level, especially given the authors’ apparent awareness of state-based distinctions on all kinds of other issues throughout the paper."

(Image: Taber Andrew Bain, CC BY 2.0)

The cover of Aaron Perzanowski's book, 'The Right to Repair.'

The Right to Repair (permalink)

Today, Aaron Perzanowski publishes "The Right to Repair: Reclaiming Control Over the Things We Own," from Cambridge University Press. It's a fitting followup to "The End of Ownership," the book he and Jason Schultz published in 2016.

The Right to Repair movement has gained momentum over the past decade, cutting through questions of IP law, environmental survivability, consumer culture, tinkerers' rights, consumer protection, fraud, information security and more.

Repair is simple: who gets to fix stuff, and under what circumstances? But preventing repair is decidedly complex: for manufacturers to assert the right – or even the duty! – to force you to use their repair services (or throw away your stuff) requires serious skullduggery.

The arguments against repair aren't new – for centuries, manufacturers have claimed that letting you fix your stuff, or replace the original parts with third-party alternatives, or refurbish something someone else threw away.

Historically, these attempts have been rebuffed. America's state religion is worship of private property rights, and that means that arguments like, "I bought it, I own it, I get to fix it" carried a lot of weight.

But the digital, corporate, neoliberal and neofeudal age has given monopolists a whole new suite of tools to dominate repairs, from claiming to be defending cybersecurity to claims of defending patents to claims of defending our safety.

Claiming "IP rights' muddied the property question, allowing manufacturers to claim that they were defending their trademarks, patents and copyrights – not sabotaging their customers' attempts to get the use they paid for our of their purchases.

And despite laws protecting purchasers from dirty tricks – like voiding warranties in retaliation for independent repair – the authorities have shown little enthusiasm for upholding the public's right to repair.

When cases are brought over repair-thwarting scams, judges are apt to tie themselves in logical knots seeking a way to get companies off the hook, in decisions that impose an obligation for all society to arrange itself to the convenience of manufacturers' shareholders.

With a series of short, punchy chapters, Perzanowski lays out the ancient, noble and necessary case for repair – a practice as old as the first resharpened stone axe – and proceeds to dissect each of the idiotic pretenses used to block it.

From IP law to trade law, from consumer protection to consumer safety, from cybersecurity to unfair competition, Perzanowski demolishes the corporate argument for filling our planet up with immortal garbage in the name of consumerism.

If you're seeking a deeper understanding of how Right to Repair has been stopped, and why it must be defended, this is an essential text.

This day in history (permalink)

#20yrsago Get Your Enron On

#20yrsago Google declares war on pop-up ads

#20yrsago TCP/IP on a Lego brick

#5yrsago The Department of Labor’s Wells Fargo whistleblower site has disappeared

#5yrsago Canadians: tell your MP to change the law so Canada can welcome Trump-stranded refugees

#1yrago David Dayen's MONOPOLIZED

Colophon (permalink)

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