b
y Christopher Peterson
Gary Coleman endeared himself to Americans as a child actor staring in the 80's sitcom "Different Strokes". His cherubic face and affably excitable character reliably delivered punch lines, including especially his signature catchphrase "Whatchoo talkin' 'bout, Willis?" When his television show ended, Coleman found that his parents and manager had mismanaged his multi-million dollar trust fund, eventually leaving him penniless.
I always felt sympathy for the actor, who suffers from a congenital kidney disease, as he tried to break out of his childhood typecasting and find a satisfying path in life. Still, it raised my eyebrows when I learned that Mr. Coleman had accepted a job as a spokesperson for Cash Call, Inc., a California based finance company that makes high-interest, unsecured loans to consumers in California, Idaho, Nevada, New Mexico, and Utah. In most other states Cash Call also acts as a solicitation agent for First Bank & Trust, Milbank, South Dakota.
This three-way relationship brought a couple of thoughts to mind:
First, lenders have a tendency to focus on economics when they talk about public policy. Discussions of usury law, disclosure law, and bankruptcy seem to inexorably turn to concepts like opportunity costs, Pareto optimal outcomes, and regulatory distortion. The intellectual contributions of behavioral economists are generally scorned or minimized. But lenders do seem to rely on psychology when they talk to their customers. Mr. Coleman is valuable to Cash Call and First Bank & Trust because of his notoriety. It is not as though loans from by a firm endorsed by Gary Coleman are better or cheaper loans. Rather they employ him because he is salient in the minds of millions of people who watched him on television back in the good-ole’ days. Mr. Coleman reminds us that things don’t always work out, and that even former TV super-stars do not need to feel bad about borrowing money from a shady company like Cash Call now and then. (Go to ripoffreport.com and search under "Cash Call" for a long list of upset customers, including this one or this one.) Mr. Coleman is an ideal spokesman for a company that wishes its customers to lower their guard. After all, who wouldn’t trust cuddly, little "Arnold" from TV?
A second point. In an essay forthcoming in the American Law Review, I question the wisdom of granting federal preemption to agents of chartered depository institutions. According to the Office of the Comptroller of the Currency and the Office of Thrift Supervision, independent agents of national banks and thrifts should be regarded as beyond the regulatory and legislative oversight of state governments. The FDIC is considering an attempt to grant similar powers to state banks, such as First Bank & Trust, Milbank, South Dakota. Federal regulators have explained that state governments should not be allowed to regulate national banks and thrifts simply because the financial institutions chose to deliver services through an agent. But as Cash Call’s relationship with First Bank & Trust demonstrates, non-depository agents will always tend to have less incentive to forego predatory behavior than a depository institution with closer oversight, greater capital requirements, and relatively greater investment in reputational capital. If First Bank & Trust wants to use Gary Coleman to peddle their high-interest loans, shouldn’t they be required to hire him directly, rather than hiding behind an agent?
In the end perhaps Mr. Coleman still deserves our empathy. I suspect he is being used yet again.