A recently surfaced clip of former Rep. Katie Porter (D-CA) has sparked a firestorm online. In a newly revealed 2021 video revealed published by Politico, Porter shouts at a staffer, “Get out of my f[—]in’ shot!”
Politico notes that its revelation of this clip comes a day after a video went viral of Porter threatening to walk out of an interview with a California CBS News reporter, adding that the newly surfaced video “will almost certainly add to criticism of Porter’s judgment and temperament.”
The clips should also lead to a reexamination of whether a “gotcha” exchange initiated by Porter at a congressional hearing generated more heat rather than light on the important policy topic of short-term lending. During a 2019 House Committee on Financial Services hearing, Porter–then a member of the committee–pressed then-director of the Consumer Financial Protection Bureau (CFPB) Kathy Kraninger to calculate the cost of a payday loan, using the federal government’s official measure of annual percentage rate (APR).
During her questioning, Rep. Porter posed the hypothetical example of a single mother who had hastily obtained a payday loan to fix her car so she could get to work on time. The mother in the hypothetical took out a two-week, $200 payday loan with a $20 interest charge and a $20 origination fee. After explaining the example, she asked Kraninger to calculate the APR of the loan. Kraninger replied that the hearing was supposed to be “a policy conversation” and “not a math exercise.” Porter cut off Kraninger, saying she was “reclaiming my time,” before Kraninger had a chance to answer.
In our 2021 paper on the harms of regulating small-dollar loans through APR measurement, CEI’s Matthew Adams and I cited this exchange, noting that “the problem is that it was difficult for Kraninger to give a clear answer.” As we explain:
APR is the mathematical calculation that adds up the amount financed, interest, fees, and payment schedule into the cost of credit expressed as a yearly rate. Its disclosure is required by laws that govern all types of loans, including those with durations of much less than a year.
However, APR disclosure rules have led to a distorted view of short-term lending. Under the traditional formula for calculating APR, the loan in Rep. Porter’s example would total a colossal 520 percent interest rate. However, the single mother in question would only have had to pay 20 percent interest, or $40, if she paid back the loan on time, within the two-week duration of the typical payday loan.
That is because few, if any, borrowers take a whole year to pay off their payday loans. Data suggest most borrowers pay back the initial amount borrowed within six weeks, so it is highly unlikely that most borrowers would end up paying anywhere near the purported APR of the loan.
In the paper, Adams and I note that while critics of payday loans such as Porter often cite APR to label the loans high-cost and predatory, the real danger to lower-income borrowers lies in using this inappropriate measuring tool to regulate them. We conclude that this “distortion in the measurement of credit costs threatens to limit or even cut off access to credit to the struggling Americans who need it most.”
In light of the recent revelations about her interrogator, Kraninger’s remark that a congressional hearing should be “a policy conversation,” rather than “a math exercise,” now seems a more fitting response to Porter’s inappropriate question.
