Posted on 03/26/2015 6:01:09 AM PDT by E. Pluribus Unum
The Consumer Financial Protection Bureau is set to hold a public hearing this week about new federal regulations for payday loans. As the head of the industry association that represents the short-term lending industry, the Community Financial Services Association (CFSA), I was disappointed the CFPB did not invite my participation as one of the panelists. In my three years of service at CFSA, I have frequently listened to the diverse audiences who will be impacted by the rule, especially small businesses owners who are often disproportionately harmed by new regulations.
There have been early warning signs that the bureau is conclusion rich and research poor. The rulemaking process is about to commence and, critically, the bureau has not yet performed the necessary research to determine how payday loans affect borrowers’ financial welfare. Without this crucial information, it is impossible for the agency to know whether, or in what circumstances, payday loans could harm consumers. The agency prides itself as being data-driven, and this information is essential to the work that it does. We have long pressed for an analysis and study to determine who benefits and who might be harmed by payday loans.
As in any industry, regulation must balance a number of factors. The need for balance is especially the case for short-term loans, which many people find useful for helping to manage their financial lives. Care must be taken not to inhibit the choice of the consumer.
Our country already faces a credit crunch, with more than 24 million underbanked households, according to the FDIC. Many of these households rely on payday loans because they are not served by the traditional banking system. In fact, more than 19 million households choose to use these loans each year for their credit needs.
In the haste to propose new regulations for payday loans, critics are calling for regulations that would further reduce choices for Americans who already lack access to the banking system. Consumers thrive when they have more choices, not fewer, and any new regulations must keep this in mind.
This is why my organization has been working at the state level to enable lenders to offer more credit options to consumers. We want more innovation and competition; it forces businesses to work harder and provide better products and services.
CFSA has long been a leader in consumer protection, with our mandatory set of Best Practices that exceed the regulatory requirements of many states. We also support the creation of a national registry of all legitimate and licensed lenders to protect against illegal, unscrupulous companies that defraud consumers. Such a registry would help protect borrowers from the cash-grab scams that pose as legitimate lenders online.
We welcome the CFPB’s consideration of the payday loan industry. We know a rule is coming and we are eager to see what the CFPB will propose.
A national discussion on how to best provide for consumers’ short-term, small dollar credit needs will be important to ensuring that the CFPB’s new rules effectively balance consumer protection with access to credit. But we can’t begin proposing solutions before we’ve identified the problem.
Payday loans represent an important source of credit for millions of Americans who live from paycheck to paycheck. Instead of limiting their options, we need to find ways to make sure they have a variety of options to help them access the credit they need.
Shaul is chief executive of the Community Financial Services Association, the industry group representing short-term lenders.
For later
Payday loans are the playground of the Idiot Class. Our group helped a guy on the Disability get out of the PayDay bind and he went right back to them like a dog returning to its vomit. He always claimed he had an “emergency” but actually he was just greedy.
Says the man who represents an industry that makes usurious loans for car titles. If he and his association were so concerned about the 24 million "underbanked" [you gotta hand it to them - makes you think of "undocumented"] needy, maybe they could hand out some loans that don't take the car title as hostage. Maybe do something like banks were forced to do - give loans to people who had no business in the world owning a home, much less pay for it. They won't? Hell no they won't. There's a reason why. And everybody know it. Some people are just meant to be and stay poor.
It used to be called ‘loansharking’.
But modern payday lenders don’t break your legs - they just turn you over to a collection agency and you get phone calls.
Besides, why bother with regulations?
Holder just arbitrarily puts them out of business with Operation Chokepoint.
What is there to research? They’re Shylocks committing legalized usury.
My daughter worked for one of these places for about 6 months. Some interesting things I learned:
In the state of Michigan, state law says you may have no more than two payday loans at a time.
You must have an “income source” and a checking account. An income source can be a government disability check, not sure about a welfare check.
They won’t loan to active duty military, I suppose in case they get killed? I gather they skip a lot on their loans, or aren’t in the area to pay it back if they get deployed.
The interest rate on a two week loan was 333%.
Most people came in, paid off their current loan and took out a new one immediately.
From what I gathered, a good share of these people were not necessarily in poverty, but had horrible money management skills. Some had emergencies and no money to cover an unplanned expense.
Current regulations probably prevent them from lending to active duty military. The times that I needed one, I had to sign a form stating that I wasn’t.
The US military has deemed most, if not all of these types as predatory lenders and they are off limits to military personnel.
http://usmilitary.about.com/od/millegislation/a/paydayloans.htm
Inside the beltway, the objective is less likely to be what's good for the consumer as it is to be what's good for the bureaucracy and the regulators. More regulations translates to more people and bigger budgets.
Just another case of liberals “helping” the poor; this time by cutting off one of the only sources of credit they have. Whose business is it what interest they charge?
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