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November 12, 2019

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Business November 12, 2019

How Some Online Lenders Dodge State Laws To Charge Triple Digit Interest Rates

Online lenders charging triple digit interest rates are dodging state laws banning such loans. The money is routed through banks that aren’t regulated at the state level to get around the rules.



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Consumer watchdogs say online lenders are dodging state laws that ban very high interest rate loans, some in excess of 100%. The lenders say they’re not doing anything wrong, but advocates say these loans are predatory and are asking federal regulators to crack down. NPR’s Chris Arnold reports.

CHRIS ARNOLD, BYLINE: OK, so let’s say that I’m an online lender charging 100% interest rates. Things are working pretty well for me here. I’m making money. But then the state of California passes a new law capping interest rates for many loans much lower – at around 38%. What do I do? Well, if I can find a partner – a real bank, one that’s not subject to the state of California’s rate cap – the loan money flows through that bank – and boom – I can get around the rate cap.

LAUREN SAUNDERS: Right. I mean, this is almost like money laundering, right? This is laundering, you know, basically the source of the money and the source of the loans.

ARNOLD: That’s Lauren Saunders, an attorney with the National Consumer Law Center. She says a lot of these online lenders are using what she calls rent-a-bank schemes. This lets them skirt state law because there’s no federal cap on interest rates, and most banks are not subject to the state rate caps. Saunders says this can work in different ways, but the simple version is this. The online lender does basically all the work to find the customers, approve the loans, collect on them, but right when someone gets a loan…

SAUNDERS: At the moment that the money actually goes to the consumer…

ARNOLD: That money comes from a bank that’s not covered by the interest rate limitations. So she says the online lender then immediately buys the loan back from the bank.

SAUNDERS: So it’s not really a bank loan. They’re just using banks as a fig leaf to make really high-cost loans – 160% interest – in states where those loans are illegal.

ARNOLD: Saunders says a lot more people are taking out online loans these days, and lenders are evading rate caps in 25 states. So she and 60 other consumer protection and civil rights groups have now sent letters to federal regulators, asking them to crack down. It seems clear that online lenders are evading state rate caps. On an earnings call before the California law passed, the company Elevate Credit Inc. talked about it openly. The interim CEO Jason Harvison talked about working with banks to get around rate caps.

JASON HARVISON: Similar to our recent experience in Ohio, we expect to be able to continue to serve California consumers via our bank sponsors that are not subject to the same proposed state level rate limitations.

ARNOLD: The online lenders, though, maintain that they’re not doing anything wrong. Elevate tells NPR in a statement that the letters from consumer groups, quote, “grossly mischaracterized our business and intent,” and that the company says its relationship with outside banks is in full compliance with all federal laws. So is dodging state interest rate rules illegal or just unseemly or just a creative way to keep serving your customers?

ADAM LEVITIN: We have a system right now that makes no sense.

ARNOLD: Adam Levitin is a law professor at Georgetown University. He says lawsuits in the works will likely help determine where the legal line is here. And he says Elevate, for example, does more sophisticated partnerships, which might be more legally defensible. So instead of the simple rent-a-bank scheme, in Elevate’s case – you might want to hang on to your brain here.

LEVITIN: The bank keeps the loan but sells a derivative interest in the loan – a 90% derivative interest – to a entity associated with Elevate.

ARNOLD: If that’s confusing, don’t worry. Levitin says the point is this whole complicated structure is being set up to get around the state rate cap. And he says the underlying problem is that some lenders have to play by one set of regulations, and banks get to play by another set of rules.

LEVITIN: The better way to do this really would be to have a national usury law.

ARNOLD: In other words, a nationwide rule that all lenders would have to follow. And today in Congress, lawmakers introduced a bipartisan bill to establish a national interest rate cap of 36%. Active duty military already have that protection. Some lawmakers want to extend it to the rest of the country. But plenty of financial firms are likely to lobby against it.

Chris Arnold, NPR News.

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Health November 12, 2019

When Countries Get Wealthier, Kids Can Lose Out On Vaccines

Mothers and their babies in Nigeria wait at a health center that provides vaccinations against polio. Vaccination rates lag in the middle-income country.

Hannibal Hanschke/Picture Alliance/Getty Images


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You’d think that as a poor country grows wealthier, more of its children would get vaccinated for preventable diseases such as polio, measles and pneumonia.

But a review published in Nature this month offers a different perspective.

“The countries that are really poor get a lot of support for the vaccinations. The countries that are really rich can afford to pay for the vaccines anyway,” says Beate Kampmann, director of the Vaccine Centre at the London School of Hygiene & Tropical Medicine and author of the review.

But, she says, “the middle-income countries are in a tricky situation because they don’t qualify for support, yet they don’t necessarily have the financial resources and stability to purchase the vaccines.”

Adrien de Chaisemartin, director of strategy and performance at Gavi, the Vaccine Alliance, agrees: “More and more vulnerable populations live in middle-income countries.” Gavi, an international nonprofit that helps buy and distribute vaccines, projects that 70% of the world’s under-immunized children will live in middle-income countries by 2030.

Brazil, India, Indonesia and Nigeria were among the 10 countries with the most children who lacked basic vaccinations in 2018 — for example, shots to prevent diphtheria, tetanus and pertussis by age 1. Each of those countries meets the World Bank’s definition of a middle-income country: an average annual income (known as the gross national income, or GNI, per capita) between $1,026 and $12,375. In Nigeria alone, 3 million kids are undervaccinated. That’s 15% of the world’s total of children who lack key vaccinations.

By contrast, vaccination rates can be high in poor countries, according to global health researchers, who say that Gavi has boosted the numbers. Rwanda, for instance, despite having a GNI of $780 per person, now has a near-universal coverage rate for childhood vaccines, on par with some of the wealthiest countries.

But in general, once a country reaches a GNI per capita threshold over $1,580 for three years, support from Gavi tapers off. And despite their improved fortunes, countries don’t always choose to fund childhood vaccines.

Angola is among the middle-income countries with the lowest vaccination rates. Diamonds and oil have helped propel the country out of low-income status, and its president is a billionaire. Yet an estimated 30% to 40% of children there did not receive basic vaccines in 2018.

The lag in vaccination rates is caused by any number of reasons. “There’s a whole list of middle-income countries, and they’re not all the same,” says Kampmann.

For example, Sam Agbo, former chief of child survival and development for UNICEF Angola, says Angola’s leadership does not fully fund immunization programs. Agbo blames a political system that he says is mired in corruption, financial mismanagement and lots of debt. So it’s hard to increase the health care budget. “Primary health care is not sexy,” he says. “People are interested in building hospitals and specialized centers rather than investing in preventive care.”

Gavi’s de Chaisemartin groups Angola with other resource-rich but corruption-plagued countries like the Democratic Republic of Congo, Nigeria, Papua New Guinea and East Timor. “These are countries where the GNI is relatively high because of their oil resources, for the most part, but that doesn’t translate into a stronger health system,” says de Chaisemartin.

Then there’s the matter of cost. Countries that buy vaccines on the open market might pay over $100 a shot.

Public attitudes also play a role. In Brazil, which is on the high end of the middle-income spectrum, an immunization program that once outperformed World Health Organization recommendations has been declining for three years. Jorge Kalil Filho, an immunology professor at the University of Sao Paulo, says public inattention and anti-vaccine campaigns, popular on social media, are undermining progress.

De Chaisemartin says the global health community needs to adjust to an unprecedented global economic shift. “Fifteen years ago, the world was divided between poor countries, where most poor people were living, and high-income countries,” says de Chaisemartin. “Now you have a lot of middle-income countries with very poor and vulnerable populations.”

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