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Attacking Agencies Results in Less Access to Capital

  • Written by Steel Rose

The National Consumer Law Center (NCLC) claims to fight for disadvantaged people. That is a great mission, and one that almost everyone in the country would agree with. But, as a part of fulfilling this mission they often sue the organizations that are helping out those same populations. From going after mortgage and auto loan practices to student loan debt and small loan practices, the organization’s mission is evident, but the end result is less access to capital, and fewer ways out of poverty than giving these individuals a helping hand.

NCLC has sued auto companies for unfair practices, Banks for unfair practices, and debt collectors for unfair practices. And, they often win their cases. The companies that they have gone after have been too aggressive both in the opinion of NCLC and the courts.

The problem arises when we look at the incentives that these “wins” create. If these “unfair” practices are removed from the business models – then the profit from them goes away. If the profit from collecting on bad debt goes – then the debt collection goes. And when bad debt can’t be resolved then lending disappears.

The problem isn’t that NCLC is necessarily wrong in their conclusion, given the cases that they have won – they aren’t wrong in their interpretation of the laws. Where they are wrong is in fulfilling their mission. If capital isn’t available to low-income communities – going to college becomes a multiple harder, buying a house becomes harder, and paying the rent and utilities can become impossible if anything unexpected happens.

It is understandable that NCLC finds some of the debt collection practices appalling – and some of them they have proved to be illegal. However, if they really want to help out these communities, they should figure out a way to provide these services without the need of the aggressive practices that they despise. They should do the hard work of setting up businesses that can operate the way that they would support operation.

In the meantime cutting off the only means of accessing capital and better life is doing nothing more than hurting the people that their mission claims that they are helping. To read more click here.