As mentioned in my last post on presentism, in researching City of Debtors, I tried to follow where my sources led me.
This approach led me to some unexpected finds that I would likely have ignored if I had approached the materials with an argument already in hand. For example, I did not expect to discover small-dollar lenders passionately arguing about the proper method for disclosing their charges to borrowers in the 1930s and 40s. The so-called “Rate Restatement Debate” pitted one faction of licensed lenders against another as the industry debated how to compete with banks and other financial institutions in the small-dollar loan market. I argue that the debate revealed fissures within the business community and waning support for regulations that had governed the industry for decades. Now that the business had attained some degree of legitimacy and the broader ideas about state oversight of the marketplace were shifting, many lenders no longer saw the need for strict disclosure requirements and other legal controls. (For those seeking more details, I describe the Restatement debate in Chapter Three of the book and in an article just published in the April 2018 issue of the Journal of Policy History on the long history of “truth in lending.")
Such historical conclusions can inform policymaking. For example, drawing on the above insights, we now know some conditions that are likely to promote industry support for regulation and also some conditions that may cause business to chaff against legal restraints. Based on this research, policymakers who seek industry support for regulation might consider if those conditions are present today and, if not, whether they can take steps to create a climate that is more hospitable to industry support for their proposals.
Likewise, City of Debtors identifies a few recurring stumbling blocks that past lending reform campaigns have encountered over the course of the twentieth century. First, it describes the difficulty of regulating these loans and lenders at the state level in a world where capital and lenders moved easily across borders and the federal government exercised minimal oversight. Second, it identifies a further obstacle to effective regulation: the inability of policymakers to decide whether small loans should be regulated in the same way as other forms of consumer credit, or instead merit special treatment. Finally, my research shows how the problem of small-sum loans has been inextricably linked with the problems of poverty and poor relief, which has compounded the complexity of the puzzle. States had a particularly strong interest in protecting small-sum borrowers, since a bad bargain could turn a poor debtor into a “pauper,” reliant on the government for financial support. On the other hand, states did not want to do away with small-sum credit entirely because these loans could act as a private safety net, allowing workers to manage financial shortfalls and make big-ticket purchases without the aid of state support, employer aid, or private charity.
Drawing on the above insights, policymakers might consider whether some or all of these stumbling blocks are impending their own efforts at reform. If so, they might then better target their energies at surmounting these challenges or lowering the barriers they present. As I have written elsewhere, this history can also serve to reframe the debate over the Consumer Financial Protection Bureau’s recent efforts to regulate payday lending and similar forms of consumer credit. In light of the long struggle among the states to regulate small-dollar loans, the CFPB’s rule looks more like a solution to an ongoing problem of state-level governance rather than a dramatic overreach by federal lawmakers and usurpation of states’ rights.
As I hope these examples show, historical research can play a role in policymaking and historians can speak to the present without engaging in presentism. The historian’s role is to help tease out what lessons for the present we can draw from our study of the past, while taking care to avoid drawing false equivalencies between then and now.
