The Trump administration regularly takes aim at the poorest and weakest members of society, especially those who don’t have the protections of citizenship. Simultaneously, it’s certain to reward the very richest with massive tax cuts and other boondoggles. And then, every so often, it manages to achieve both goals in a single piece of legislation—eviscerating the poor in order to benefit the rich.
The best example of this will probably come with the Republicans’ healthcare legislation, if and when it ever arrives. But for its narrow-minded malignancy, it’s hard to beat this bill from David Perdue, the Republican senator from Georgia.
BuzzFeed’s Matt Zeitlin explains that Perdue’s bill is designed to allow prepaid debit card issuers to charge overdraft fees, but doesn’t quite spell out just how sinister the legislation is. To understand that, you first need to understand that, the overwhelming majority of the time, it makes no sense at all for a prepaid debit card to allow for overdraft fees.
After all, prepaid debit cards generally work a bit like cash: You put money on them, and then you spend down that money by using them to pay for things in stores and online. Many debit cards are theoretically reloadable, but in practice most prepaid debit cards are simply thrown away when they no longer have any money on them. Which means that if you were able to spend more than was on the card, you’d effectively be getting free money. There’s no way that it would make sense for the issuer to try to sue you for a few bucks.
As a result, no reputable prepaid debit card allows overdrafts. But there’s one area where it makes sense for a debit card issuer to encourage their cardholders to rack up debts—and that’s when the card issuer is working on behalf of a payday lender.
The way that payday loans work is that you get a loan today, and then pay the money back, with exorbitant interest, as soon as you get paid. In order to qualify for such a loan, you need a bank account that your paycheck gets deposited into, so that the lender can take the money out as soon as it hits. But sometimes people don’t want the money from their loan to be deposited directly into their account. In that case, they can get the money on a prepaid debit card instead.
And this is where things get cunning. If the borrower then spends more money than has been put onto the card, the lender can charge a whopping great overdraft fee, and simply add it to the amount of the loan. That’s a great way of effectively increasing the interest rate on the loan, possibly without the borrower ever finding out what happened.
Perdue’s bill, then, is not really about overdraft fees in general, or even about prepaid debit cards, so much as it’s a backdoor way for payday lenders to ratchet up the amount of interest they get paid, at the expense of their desperate borrowers. There is no good reason for this bill to get passed, beyond the avarice of those who are already making millions by preying on the poor.
Still, there’s a good chance that the bill will end up being passed, for three reasons. Firstly, it involves rolling back a regulation (the regulation against prepaid debit cards allowing overdrafts)—and the Republicans love anything that looks like deregulation. Secondly, it’s a stick in the eye of the Consumer Financial Protection Bureau, which has been a Republican bogeyman since it was first raised by Elizabeth Warren. And thirdly, its ultimate beneficiary—the payday lending industry—is nowhere mentioned in the bill, and can therefore just sit off to the side with a smug and innocent look on its face.
It goes without saying, of course, that Trump voters constitute a huge proportion of the people who will be most harmed by this bill. But very few of them will even notice the legislation, or blame Trump for their increased loan repayments. That’s what the Republicans are betting on, anyway. And, sadly, they’re probably right.