Pluralistic: 24 Apr 2021

Originally published at: https://pluralistic.net/2021/04/24/peloton-usury/


Today's links



Guess who's doing a usury in Iowa (permalink)

Iowa's HSB 272 ("An Act relating to tax collection and penalties, tax permits and loans made by state-chartered banks") is the kind of bureaucratic maneuver Woody Guthrie's meant with, "Some will rob you with a six-gun, and some with a fountain pen."

https://www.legis.iowa.gov/legislation/BillBook?ga=89&ba=HSB272

On its face, the bill is a completely ordinary piece of tax-code cleanup, purging some superannuated rules and consolidating others. But as Iowa law prof Chris Odinet writes for Credit Slips, there's a clever gotcha hidden in that bloodless language.

https://www.creditslips.org/creditslips/2021/04/of-usury-preemption-and-fancy-stationary-bikes.html

Here's where the knife slips in: "The general assembly of Iowa hereby declares… it does not want any of the provisions of any of the amendments contained in Public Law No. 96-221 (94 stat. 132), sections 521, 522 and 523 to apply with respect to loans made in this state…"

Eliminating Sec 521 means that out-of-state banks chartered by the FDIC would no longer be bound by Iowa's usury laws. That opens the door to "partnerships between a handful of state-chartered banks and so-called 'fintech' nonbank lenders making triple digit loans."

As the Trashfuture folks like to remind us, any time you read the word "fintech," substitute "unregulated bank."

And as Odinet writes, this rent-a-bank scheme has led to "unique legal and policy problems."

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3677283

So far, so normal: corruption buried in an obscure tax-bill. But then it gets weird. It turns out that this maneuver to legalize loan-sharking in Iowa is the result of lobbying by…Peloton! (yes, that Peleton!).

Peleton makes a luxury "smart" exercise bike and many people who want to own such a thing can't afford it, so Peleton has partnered with a fintech company called Affirm, which finances the $3k needed to buy a Peleton bike.

And Affirm is a predatory lender. While it advertises "0% down, 0% APR, 0% hidden fees," its website offers this warning (in 10.5 point grey-on-white type):

"Your rate will be 0–30% APR based on credit, and is subject to an eligibility check. Options depend on your purchase amount, and a down payment may be required…Affirm Plus financing is provided by Celtic Bank, Member FDIC."

Affirm's EULA: 'Your rate will be 0–30% APR based on credit, and is subject to an eligibility check. Options depend on your purchase amount, and a down payment may be required. Affirm savings accounts are held with Cross River Bank, Member FDIC. Savings account is limited to six ACH withdrawals per month. Affirm Plus financing is provided by Celtic Bank, Member FDIC. Affirm, Inc., NMLS ID 1883087. Affirm Loan Services, LLC, NMLS ID 1479506. California residents: Affirm Loan Services, LLC is licensed by the Department of Financial Protection and Innovation. Loans are made or arranged pursuant to California Financing Law license 60DBO-111681'

https://www.affirm.com/

So Affirm has a rent-a-bank scheme with Iowa's Celtic Bank, and eliminating Section 521 will let it make loans in Iowa so long as they meet standards in California. That's a good deal if you want to advertise "0% down, 0% APR, 0% hidden fees," and charge "0-30%."

Odinet points out that Affirm's 30% APR is pretty low by the usury standards of fintech companies, but "it opens the door to much higher cost lending by firms like Elevate Credit, Opportunity Financial, and more–all of whom use the rent-a-bank model."

(Image: Thomas Hawk, CC BY-NC, modified; Peloton, fair use; Library of Congress, public domain)



This day in history (permalink)

#15yrsago DMCA revision proposal will jail Americans for “attempting” infringment https://web.archive.org/web/20060502093524/http://ipaction.org/blog/2006/04/bill-hollywood-cartels-dont-want-you_24.html

#15yrsago Proposal to let employees use personal laptops https://web.archive.org/web/20060427234521/https://zgp.org/~dmarti/blosxom/business/byol.html

#10yrsago New Zealand’s rammed-through copyright law includes mass warrantless surveillance and publication of accused’s browsing habits http://www.stuff.co.nz/technology/digital-living/4922854/Copyright-change-about-more-than-idle-threats

#10yrsago Passover poem about robots: “When We Were Robots in Egypt” https://www.tor.com/2011/04/24/when-we-were-robots-in-egypt/

#5yrsago Leading Republicans send letters in support of Dennis Hastert, pedophile https://web.archive.org/web/20160423124235/https://www.chicagotribune.com/news/local/breaking/ct-dennis-hastert-letters-met-20160422-story.html

#1yrago Facebook let advertisers target "pseudoscience" and "conspiracy" https://pluralistic.net/2020/04/24/slicey-boi/#upton-sinclair-disease

#1yrago Amazon uses its sellers' data to figure out which products to clone https://pluralistic.net/2020/04/24/slicey-boi/#moral-hazard

#1yrago Masks work https://pluralistic.net/2020/04/24/slicey-boi/#pewpew

#1yrago US healthcare fails insured people too https://pluralistic.net/2020/04/24/slicey-boi/#m4a

#1yrago A labradoodle breeder is in charge of America's vaccines https://pluralistic.net/2020/04/24/slicey-boi/#labradoodles

#1yrago Which guillotine is right for you https://pluralistic.net/2020/04/24/slicey-boi/#slicey-boi

#1yrago Security expert conned out of $10,000 https://pluralistic.net/2020/04/24/slicey-boi/#overconfidence



Colophon (permalink)

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/).

Currently writing:

  • A Little Brother short story about pipeline protests. RESEARCH PHASE
  • A short story about consumer data co-ops. PLANNING

  • A Little Brother short story about remote invigilation. PLANNING

  • A nonfiction book about excessive buyer-power in the arts, co-written with Rebecca Giblin, "The Shakedown." FINAL EDITS

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Past Performance is Not Indicative of Future Results https://craphound.com/news/2021/03/28/past-performance-is-not-indicative-of-future-results/
Upcoming appearances:

Recent appearances:

Latest book:

Upcoming books:

  • The Shakedown, with Rebecca Giblin, nonfiction/business/politics, Beacon Press 2022

This work licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net.

https://creativecommons.org/licenses/by/4.0/

Quotations and images are not included in this license; they are included either under a limitation or exception to copyright, or on the basis of a separate license. Please exercise caution.


How to get Pluralistic:

Blog (no ads, tracking, or data-collection):

Pluralistic.net

Newsletter (no ads, tracking, or data-collection):

https://pluralistic.net/plura-list

Mastodon (no ads, tracking, or data-collection):

https://mamot.fr/web/accounts/303320

Twitter (mass-scale, unrestricted, third-party surveillance and advertising):

https://twitter.com/doctorow

Tumblr (mass-scale, unrestricted, third-party surveillance and advertising):

https://mostlysignssomeportents.tumblr.com/tagged/pluralistic

"When life gives you SARS, you make sarsaparilla" -Joey "Accordion Guy" DeVilla

This topic was automatically closed after 15 days. New replies are no longer allowed.