Treat adults like adults.

I looked into a few policy recommendations coming from the Center for Responsible Lending, based on yesterday’s post. My initial hunch proved correct. Consider its stance on “Debit Card Danger”:

Banks stand back as debits and ATM withdrawals cause high-cost overdrafts for their customers

Rather than linking their customers’ checking accounts to their savings or other resources to cover overdrafts, many banks and credit unions are automatically covering their customers’ shortfalls with expensive short-term loans.

More overdrafts are happening when customers swipe their debit card or make an ATM withdrawal than when they write a check. In these cases, banks can warn customers or merchants when they have insufficient funds—but most do not. They can also decline the transaction and save the customer the overdraft fee—but most do not.

See, we should blame the banks because people don’t manage their money. Someone should be looking out for the customer who can’t keep track of his checking account. Someone should look out for him, even though he signed up for the account with “expensive” short-term loans. Remember, banks are in the business of giving away money to customers. That’s the purpose of banks. They have money. They give it to people who don’t have it.

I never use my bank card as a debit card, instead opting for the credit card feature. Perhaps I just have better credit than most Americans, but I doubt it. My brother got it on his card when he opened a checking account at 18-years-old. As you could expect, the Center for Responsible Lending’s stance doesn’t get any better when looking at credit cards:

While some cardholders use their credit for occasional purchases, working families have come to rely on plastic to weather economic downturns or to make essential purchases: groceries, medical expenses, home repairs. Even though most households pay more than the minimum each month, more and more people find themselves perpetually indebted to the credit card industry. College students and other minors have also become attractive targets for the marketing of cards that contain hidden transfer charges, exorbitant late fees and exploding interest rates.

Any public policy that starts with the premise of “working families” and “weathering economic downturns” will most likely be garbage. I suffered through years of credit card debt that I brought upon myself. I ended up using my cards to make essential purchases like groceries. This was my fault. I’m not saying that people are to blame for every bad incident in their life, but placing this at the feet of credit card companies is silly. They offer a service. People can buy that service or not.

It’s just as possible to say that people use credit cards to manage economic downturns so that they don’t have to rely on others, including the government, to bail them out. They know that their situation will change, and they’ll repay the debt. Again, tighter regulation, which is what I suspect is the ultimate policy recommendation, cuts both ways. Consumers will suffer. The ability to manage their present and future is limited as much as their opportunity to screw it up. This is about who knows best, individuals or central planners.

Naturally the Center has an opinion on Tax Refund Anticipation Loans.

Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer’s anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR. Also, they speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts. There were over 12 million RAL borrowers in 2003.

Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a 2005 study by the National Consumer Law Center.

There are few worthwhile angles here. Taxpayers shouldn’t be getting refunds hefty enough to justify such fees. Teach people to adjust their withholding exemptions to come much closer to their tax liability. They’ll have more cash throughout the year. (By extension, that might also impact the debit and credit card “problems”.)

The last sentence is the real kicker here. Tax preparers and lenders strip these dollars in fees. Why not just say that they rape customers if you’re going to implicitly accuse them of thievery? Teach people to manage their money, if that’s the problem. Teach them to read their contracts, if that’s the problem. Teach them to …

You get the drift. The Center for Responsible Lending seems more interested in being the Center for Lending Regulation, with a healthy disrespect for the abilities of “working families” to manage their money. Whatever evidence exists to support such a belief is not sufficient justification to punish with more regulation those who can do what the Center for Responsible Lending believes is impossible, or worse, unnecessary.