Would Postal Banking Be Better than Payday Loans?

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Earlier this week, Liana Molina, director of community engagement at the California Reinvestment Coalition, testified at a field hearing held by the Grand Alliance to Save Our Public Postal Service.  The alliance is focused on  “the choice now facing the U.S. Postal Service: Build on the heritage of universal, nationwide service and expand to meet the needs of the hi-tech economy and low-income communities – or continue to shrink with declining service, facility closings and job cuts.”

USPS picture

Molina’s testimony focused on a proposal for the USPS to complete with fringe, predatory payday, car title, and other high cost lenders by instead offering safe, low-cost financial services.  Her testimony is included below.

Good evening, my name is Liana Molina. I’m the Director of Community Engagement at the California Reinvestment Coalition (CRC). The California Reinvestment Coalition is a statewide, membership based organization working to build a fair and inclusive economy that meets the needs of communities of color, low-income communities, and others who have been marginalized and historically underserved.  We use strategic advocacy that leads banks and other corporations to provide investments and financial services that expand access to housing that is affordable, entrepreneurial opportunities, good jobs, and other tools to create and sustain household and community wealth.

Historically CRC has advocated for greater transparency and accountability of the banking industry, and we’ve pushed banks to grow and strengthen their community reinvestment lending, services and investments in low-income communities across California. Today we continue our work to expand access to fair and affordable banking, credit and other financial services and opportunities for underserved consumers.

I lead CRC’s Stop the Debt Trap campaign to reform high-cost payday, car title and installment lending practices. We are employing a multi-pronged approach that entails legislative and regulatory advocacy at the local, state and federal level. Before I delve into the specific policy reforms we are seeking and how the US Postal Service can play an important and impactful role in the struggle against predatory lending, let me share why we got involved in the fight to end predatory payday lending.

Our efforts against predatory payday lending stem from our work to change and improve the mainstream banking sector.

Did you know that every single payday loan borrower is also a bank customer? A consumer needs to have an active checking account in order to obtain a payday loan, since the loan is secured with a post-dated check which is then deposited by the lender on the consumer’s next pay date.

So these consumers are not entirely unbanked. These are people who likely use their bank accounts for direct deposit of their income and to handle other basic financial transactions, such as paying regular bills. Yet, these consumers cannot borrow a $300 or $500 loan from their bank because the banks do not make small dollar loans that meet the credit needs of their clients. So this is one way the banks are part of the problem.

Additionally, many of the big banks are actually invested in payday loan corporations through extending lines of credit they provide to payday lenders, which enable payday lenders to conduct their business. So while the banks aren’t making affordable small dollar loans directly to their customers, they have major credit agreements with payday lenders who then charge these same customers triple-digit interest rates on short-term loans. Banks involved in financing high-cost, low-quality lending through lines of credit and term loans to payday loan corporations include Wells Fargo, Bank of America, JP Morgan Chase, US Bank and others.

Finally, CRC has prioritized our Stop the Debt Trap campaign to end predatory consumer lending because when we talk about the provision of financial services in low-income communities, many economically disadvantaged neighborhoods do not have access to full service bank branches. Instead, these neighborhoods are saturated with fringe financial entities such as check cashers, pawn shops and payday loan outlets, all of which strip the income and assets of consumers struggling to make ends meet. We also know that payday loan stores are more likely to be located in African-American and Latino neighborhoods than in white neighborhoods.

Given this landscape, there is room for a lot of improvement in how our financial system meets the credit and capital needs of low and moderate-income consumers. While CRC agrees that there is a legitimate need for access to credit, debt trap products like payday, car title and installment loans (which are basically payday loans on steroids) do not help people over the long-term.

Payday Lenders

In California, the interest rate on a two-week, $300 payday loan is 459% APR. It amounts to $15 per $100, or $45 to borrow $255. It may not seem so bad at the face value, and most consumers can afford to pay $45 for a $255 loan. However, payday loans require a balloon payment of the full $300 at the borrower’s next pay date, two-weeks later. Most borrowers do not have $300 to pay off the debt without having to re-borrow. So unless the borrower has an increase in their income or a decrease in their expenses, in 4 out of 5 cases, they will take out another loan in order to meet their basic expenses for the next two weeks. This cycle repeats itself an average of 7-10 times for consumers, and drains Californians of over $578 million in interest and fees, annually.

High-cost car title and installment lending is growing in California. Now that the federal Consumer Financial Protection Bureau is poised to issue rules on payday lending, more payday lenders are moving into these other loan products that are just as dangerous. Our state doesn’t regulate the interest rates on payday loans below $300 or on consumer loans above $2,500. We are seeing more car title loans at interest rates at around 100% APR and longer-term installment loans with interest rates at 200% or higher. For example, one borrower working with us on the campaign paid $6,700 over 24 months for a $2,529 car title loan at 112.47%. It’s outrageous.

CRC and other consumer groups have been advocating for changes to local and state laws to rein in these predatory lending practices for many years, and it has been an uphill battle. One of our greatest challenges is the lack of wide-scale alternatives available on the market. Many of our policy makers accept predatory lending as a necessary evil, because they claim that their constituents need access to these loans, and the banks are not lending.

Do you see where I’m going with this?

This is where the concept of postal banking could really make a tangible difference in providing an accessible, responsible, affordable alternative loan product to consumers. The US Postal Service already provides some financial services, such as money orders, cashing of treasury checks, international paper and electronic money orders and gift cards. There is tremendous potential to expand the products and services offered by the USPS to meet the financial needs of underserved populations. We recognize that moving the postal service into offering consumer loans is a long-term process, not an immediate step. However, given the huge demand for small dollar consumer loans, it is a vision that is worth working toward.

When CRC learned about the Campaign for Postal Banking, we were excited to learn that a national coalition has come together to advocate for the USPS to act immediately to expand and enhance existing products and services. While the creation of small dollar lending and savings programs would necessitate Congressional legislation, the USPS could begin to build on the financial products and services currently offered. For example, the postal service could start cashing payroll checks, it could install surcharge-free ATMs in post office lobbies to enable recipients of public benefits to access their funds without paying fees, and it could introduce bill payment and electronic fund transfer services.

By providing less expensive financial products and services, the USPS could help improve the financial stability of millions of Californians. A postal banking system would not only benefit consumers who do not have access to mainstream financial institutions, it would also provide a sorely needed alternative to the big banks who wrecked our economy with predatory mortgage lending and then exploited tax payers by receiving trillion dollar bailouts.

We know that a public banking option is possible. The United States had a Postal Savings System from 1911-1967, which at its peak held about 10 percent of assets in the entire commercial banking system. Today, 1.5 billion people worldwide receive some financial services through their postal service in countries like the United Kingdom, France, Italy, and Japan. Posts around the world have demonstrated the feasibility of successfully providing financial services, increasing financial inclusion and generating revenue for the postal service.

We believe this is possible in the United States, and it will require our persistent advocacy and campaigning to bring about these types of changes. CRC is optimistic about the current dialogue around postal banking, and we look forward to participating in local, regional and statewide efforts to move this conversation forward. We greatly appreciate the work of A Grand Alliance to Save Our Public Postal Service and the Campaign for Postal Banking.

Thank you for the opportunity to testify.

 

Here’s 7 Reasons Payday Lenders Are Worried About Their Profits

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Payday Pay to Play

1. They’re spending a LOT of money on politicians BUT money can’t always buy you love

The payday lending industry has always “invested” gobs of money in politicians and elected officials as a way to fight off state-level regulation.  According to a new report from Americans for Financial Reform, the industry must be really worried. They spent over $15 million in campaign contributions during the 2013-14 campaign cycle. Some notable recipients include Representative Debbie Wasserman Schultz from Florida who received $31,250.  Wasserman Schultz later signed onto a letter with her Florida colleagues, suggesting that the CFPB shouldn’t make payday lending rules too restrictive.  In response, more than 20 Florida organizations that actually work with people who use payday loans (and see the damage caused by them), wrote a letter to the Florida delegation, reminding them that contrary to the marketing of these loans, the reality is that 63% of payday loan customers in Florida take out 12 or more loans each year.

 2. Regulators are clamping down on their illegal practices:

“A huge payday lending operation based in Kansas City will be banned from offering any more loans under a $54 million settlement announced by federal regulators Tuesday.”  Firms accused of faking loans, draining bank accounts settle with feds

“The Consumer Financial Protection Bureau (CFPB) is suing the NDG Enterprise, a complex web of commonly controlled companies, for allegedly collecting money consumers did not owe. According to the agency’s complaint, the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay, and falsely threatened consumers with lawsuits and imprisonment.”  Offshore payday lender hit with CFPB lawsuit

And, World Acceptance, one of the shadiest lenders out there, also recently shared that the CFPB is investigating it: This Payday Lender Is Being Investigated by the CFPB, and the Stock Got Crushed

3. People don’t like payday loans, in fact, 75% of people want stronger regulation of them.

The more that people learn about payday loans, the more they support regulation of them.  For example, a recent survey by the Pew Charitable Trusts finds that 75% of respondents believe there should be more regulation of payday loans.  This is an increase from 72% of respondents surveyed in 2013.
Did we mention that there have been 95 newspaper editorials written AGAINST payday lending in the past year and a half?

 

4. The gloves are off in exposing payday loan financiers

 The HuffingtonPost broke the story that a new project run by Allied Progress will expose secrets of the payday lending industry- and who profits from it:

“We’re going to do the hard work to expose who these people are and their links to some big corporations and individuals who would prefer to stay in the shadows,” said Frisch. “We’re looking at all types of predatory lending, payday loans, car titles, check cashing, bank fees. Nothing is off the table, both nationwide and in the states, if we see that we can make an impact.”

Read more here: New Project Seeks To Unmask Shadowy Payday Lenders

Another excellent resource for unmasking the folks that profit off of the payday loan debt trap and other shady companies is a website created by Unite Here, called “Loan Shark Funds”, nicknamed after the “Lone Star Fund” that is investing in payday lenders like DFC Global, which it purchased in December 2014.

Take a look: LOAN SHARK FUNDS website:

Lone Shark Funds

5. Companies are heading for the exit doors

Some companies like EZ Corp are seeing the writing on the wall.  The more people learn about payday, car title, and high cost installment loans, the less they like them.  The company announced in July 2015 that it is no longer going to originate payday, car title, or high cost installment loans.

6. Payday Money = Dirty Money  (can somebody please tell the politicians?)

Money made off of putting people in a payday loan debt trap is dirty money.  Take a look at this private school that announced it was returning donations from a payday loan company that is part of a settlement with federal authorities.

7. Banks don’t want to aid and abet this predatory profit model anymore

In this case, it’s a bank in Australia: “Westpac pulls out of funding payday lenders

According to a recent report from our allies Reinvestment Partners, (Connecting the Dots: How Wall Street Brings Fringe Lending to Main Street) there’s still some banks in the US that are willing to fund payday lenders.

Some of the largest banks include:

Wells Fargo ($WFC)

Bank of America ($BAC)

US Bank ($USB)

Capital One ($COF)

Read the report to see more excellent graphs and information like this one:

Wells Fargo Funding High Cost Consumer Loans

 

Did you like this post?   Check out a few of our other most popular payday lending posts:

95 Editorial Against Payday Lenders

CFPB Field Hearing in Richmond, Virginia Summary

The Payday Lender Hall of Shame

 

New Study Finds Banks Maintain Foreclosed Homes Worse in Communities of Color

Oakland Picture

A bank-owned home in Oakland that was photographed as part of new study.

Fair Housing of Marin (FHOM), the National Fair Housing Alliance (NFHA), and 16 fair housing centers released a report earlier this week detailing racial disparities in maintenance of bank-owned and Fannie Mae-owned foreclosures in 30 metro areas nationwide. FHOM investigated the Vallejo area and FHOM and NFHA investigated the Richmond and Oakland areas.

The investigations took into account over 30 different aspects of the maintenance and marketing of each property. REOs in communities of color were 2.6 times more likely to have 10 or more deficiencies than REOs in White neighborhoods (32.0% vs. 12.4%).

In the areas that FHOM investigated, REOs in communities of color were

  • 2 to 3 times more likely to have trash accumulated on the premises than REOs in White neighborhoods;
  • about 2.5 times more likely to have unsecured, broken, or boarded windows or have a trespassing or warning sign than REOs in White neighborhoods;
  • about 2.5 times more likely to have a trespassing or warning sign versus REOs in White communities.

To read the full press release about the report and its troubling findings, visit the Fair Housing of Marin website: Investigations of Bank-Owned Properties Uncovers Discrimination

To read the full report, visit this link: http://bit.ly/reo2014

 

 

Community leaders protest sale of 20 local Banco Popular Branches in Los Angeles

Banc of California Press Conference Picture

Editor’s note: On September 4, 2014, Banc of California announced a new, public Community Benefit Plan.  Read more details about the plan here: CRC Announces Support for Community Benefit Plan by Banc of California as Part of Banco Popular Branch Acquisition

Earlier this week, prominent local Los Angeles leaders gathered at a downtown Banco Popular and held a press conference, urging a bank regulator to postpone the sale of the 20 branches until more information is given to the community about the acquisition. Banc of California, headquartered in Irvine, is trying to buy 20 Banco Popular branches which are located in Los Angeles and Orange counties.

In its application to buy the branches, Banc of California said that it would eliminate three checking account features at Banco Popular, including cash incentives for opening new accounts, interest rate bonuses on savings when customers maintain their checking accounts, and a debit card reward program.  Community advocates criticized the proposed cuts, saying that these features help people to open and maintain checking accounts, which can be the first step in building a financial history.

Community leaders are deeply concerned that Banc of California has not provided much detail in its community reinvestment activities since its last CRA exam, which examined the bank’s activities from January 2010 to December 2011 and earned the bank a “satisfactory” rating.  Since that time, the bank has grown considerably, and given its larger size, the bank’s next Community Reinvestment Act will be more extensive. Despite the nearly 2 ½ years that have passed since that exam, the bank did not provide much information in its acquisition application.  The bank noted a recent investment in a Community Development Financial Institution as well as the fact that bank staff volunteer with local nonprofits.

The Office of the Comptroller of the Currency is the bank regulator that will decide whether or not to approve the bank’s acquisition application.

Paulina Gonzalez, executive director of the California Reinvestment Coalition, an umbrella organization with over 300 organizational members throughout the state, explains: “While other large banks develop their CRA plans with input from the community, Banc of California has not. While other large banks make their community reinvestment goals public, Banc of California has not. The FDIC and the Federal Reserve have both required this type of transparency in recent bank mergers and acquisitions, and we expect no less from the Office of the Comptroller of the Currency.”

The comment period for the public to weigh in on the bank’s acquisition was recently extended by the Office of the Comptroller of the Currency (bank regulator) to August 19th.  The comment period was extended because the bank originally published its announcement in the Orange County Register and New York Times.  The California Reinvestment Coalition pointed out to regulators that current Banco Popular customers may have missed the notice.  The new notice was published in La Opiniónand Los Angeles Times.

The California Reinvestment Coalition, an umbrella coalition of over 300 organizations throughout California, is urging the Office of the Comptroller of the Currency to postpone or deny Banc of California’s application until the Banc is more transparent with the community.

Picture from Press Conference: Banco Popular Protest

Picture of 20 branches to be acquired: 20 Branches.

Letter from California Reinvestment Coalition to Bank Regulator, opposing merger: CRC letter

The Banc of California Acquisition application can be downloaded here: Banc of California application

If you’re interested in learning more about the Community Reinvestment Act, read this article:

The Community Reinvestment Act: A Law That Works

If you’d like to learn more about this recent proposed acquisition, these articles give more context.  Please note, some of the American Banker articles require a subscription to view.

Communities Deserve Transparency in Bank M&A In this Op-Ed, Paulina Gonzalez, executive director of the California Reinvestment Coalition, explains why CRC is opposing Banc of California’s proposed acquisition of 20 Banco Popular branches. Gonzalez cites a lack of CRA transparency and questions how the  Office of the Comptroller of the Currency can review the proposed acquisition when Banc of California has provided few details on bank activities that would qualify for credit under the Community Reinvestment Act. BankThink.July 24, 2014.

East L.A.’s Pan American Bank gets $6-million bailout from other banks In this article about 16 community and regional banks investing in Pan American bank, opposition to Banc of California’s proposed acquisition of 20 Banco Popular branches is cited. E.Scott Reckard.Los Angeles Times. July 23, 2014.

Fusión bancaria podría eliminar programas para latinos Prominent Los Angeles community leaders gathered at a local Banco Popular branch to speak out about the lack of transparency in Banc of California’s community reinvestment plans. Araceli Martínez Ortega.La  La Opinión. July 22, 2014.

Banc of California expansion opposed by advocates for minorities, low-income CRC’s concerns about Banc of California’s lack of a public Community Reinvestment Act plan are cited in this article. Paulina Gonzalez, executive director at CRC, explains the importance of transparency in building trust with customers. Josie Huang. Southern California Public Radio. July 22, 2014.

Advocacy Group Secures Review of California Branch Deal When Banc of California announced its intention to acquire 20 Banco Popular branches, it published notice in theOrange County Register and the New York Times. In CRC’s letter to the OCC opposing the acquisition until Banc of California is more transparent in its plan for the branches and community, CRC members expressed concern that current Banco Popular customers may not have seen the notice. This article explains that the Office of the Comptroller of the Currency required Banc of California to re-publish the notice in local media, including the Los Angeles Times and La Opinión. The OCC also extended the comment period on the proposed acquisition 30 days, until August 19th. Chris Cumming. American Banker. July 18, 2014.

Banc of California, Advocacy Group Spar over CRA Plan CRC’s opposition to Banc of California purchasing 20 Banco Popular branchs is cited in this article. Paulina Gonzalez is quoted about the bank lacking a public community reinvestment plan. Chris Cumming.American Banker. July 17, 2014.

Banc of California Expects OK of Branch Purchases CRC’s support for Banc of California to release a public reinvestment plan prior to its acquisition of 20 Banco Popular branches is cited. Andrew Edwards. Los Angeles Business Journal. July 15, 2014.

Activists Oppose Banc of California Acquisitions CRC’s opposition to Banc of California’s acquisition of 20 Banco Popular branches is cited in this article. Andrew Edwards. Los Angeles Business Journal. July 14, 2014.

The Payday Lender Hall of Shame

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Cartoon - Shark Infested Waters

Ever wonder why people are concerned about payday loans and some of the companies that make them?  Is it the high interest rates? The debt traps they create for their customers?  Their shady collection tactics?  The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above?

We’ve compiled excerpts from a few of the articles that highlight some of the worst practices of payday lenders below.  You may also enjoy our compilation of newspaper editorials against payday lenders (click here).

If you are a customer with a complaint about your payday lender, we suggest filling out a complaint with the Consumer Financial Protection Bureau (click here).  The online process is fast, and it’s important for the CFPB to hear when companies are breaking the law, especially since they’re writing rules for payday lenders this year.

A graphic from the Ace Cash Express training manual confirmed advocate suggestions that the payday loan industry profits the most off of people who continualy renew their loans because they can’t afford to pay them off.  The end result?  The consumer pays hundreds or even thousands of dollars for a loan that was originally only a couple of hundred dollars.

ACE Cash Express

 

 

“Over the next five years, those five short-term loans of $500 each would cost him more than $50,000 in interest.” KC man pays $50,000 interest on $2,500 in payday loans (Donald Bradley, Kansas City Star, May 17, 2016)

For her part, Mitchell said she’s done with payday loans, noting that she tells her 12-year-old daughter to stay clear of the products. “I would starve before getting another payday loan,” she said. “I just think it’s robbery.” 1,000% loans? Millions of borrowers face crushing costs (Alain Sherter, MoneyWatch, April 25, 2016)

Judge: $1,820 repayment on $200 loan ‘unconscionable’

Monday’s ruling by Vice Chancellor J. Travis Laster involved a loan that Gloria James of Wilmington took out in 2013 to pay for food and rent. James, who was earning $11.83 an hour as a part-time housekeeper at the Hotel DuPont, went to a storefront business called Loan Till Payday. It is run by National Financial LLC, a Utah company that specializes in small-dollar, high-interest loans. She obtained what the business called a Flex Pay Loan, requiring her to make 26, biweekly, interest-only payments of $60, followed by a final payment comprising both interest of $60 and the original principal of $200. The total repayments added up to $1,820, equating to an annual percentage rate of more than 838 percent. “That level of pricing shocks the conscience,” wrote Laster, who said the loan could be rescinded because it was “unconscionable.” He also concluded that National had violated the federal Truth in Lending Act. (Randall Chase, AP, March 14, 2016).

Report of Examination gives look inside payday lender’s alleged wrongdoing                    Banking examiners say the over-charges are actually “double-charges” the lender collects by requiring a post-dated check from the borrower for the loan amount and fees when a loan is made. The lender gets the double-charge by processing the check through the Automated Clearing House, a nationwide electronic network for credit and debit transactions, while also collecting an in-store cash payment from the customer, according to examiners. All American had an “unwritten” policy of not refunding customers for overpayments, unless and until the customer specifically requested a refund, examiners say. (Ted Carter, Mississippi Business Journal Feb 18, 2016).

As regulators put a price tag — $1.32 billion — on what Scott Tucker’s payday-lending enterprises have squeezed out of poor people, a grand jury convenes  On January 20, the FTC asked a federal judge in Nevada to find Tucker and his companies liable for $1.32 billion. That sum, the FTC says, equals what Tucker’s customers have overpaid above the disclosed costs of their loans since 2008 alone. The FTC’s request to the judge was accompanied by thousands of pages of evidence, unsealed for the first time, that show how Tucker made his money, what he spent it on, and how he has attempted to shield himself from the glare of authorities. (Steve Vockrodt, The Pitch News, Feb. 2, 2016)

EZCorp settles federal payday lending complaint: The $10.5 million charge will be included in the company’s financial statements for the year ended Sept. 30. EZCorp also agreed to forgive all outstanding payday and installment debt, which had already been written off for financial purposes, the release indicates. (Christopher Calnan, Austin Business Journal, Dec 16, 2015).

Justices crack down on high-interest usury The court rejected defendants’ expert witnesses’ view that an 11,000 percent – or even an 11 million percent – interest rate would be acceptable in New Mexico because there is no usury statute.  (Marshall Martin, guest column for Albuquerque Journal, September 1, 2014)

High-Interest payday loans called predatory, but regulations die In Iowa Legislature Contributions from the payday loan industry amounting to over $83 million have poured into state campaigns across the country, according to data from the National Institute on Money in State Politics. The institute shows Iowa legislators have pocketed more than $360,000 from donors associated with the payday loan industry since 1998. (Lauren Mills, Iowa Watch, August 10, 2014).

Payday loan firms drove Samantha’s dad to suicide. But even death didn’t stop them hounding him He killed himself last November, too embarrassed by his debts to seek help. Giving evidence, Samantha told the inquest that after his death her father was sent more than 1,000 texts from loan companies demanding repayment.She has no idea how many texts Ian received before he killed himself, because he’d deleted his phone’s history, but she can’t believe they only started afterwards. She also found letters from payday lenders at his home demanding immediate repayment of outstanding arrears. One, delivered two days after his death, threatened court action and bailiffs unless he paid up.

ACE Cash Express paying $10 million to settle debt collection probe When a consumer “exhausts the cash and does not have the ability to pay,” ACE “contacts the customer for payment or offers the option to refinance or extend the loan.” Then, when the consumer “does not make a payment and the account enters collections,” the cycle starts all over again — with the formerly overdue borrower applying for another payday loan, the bureau said.   (Barry Shlachter, Star Telegram, July 10, 2014)

Will the Government Finally Regulate the Most Predatory Industry in America?  “Jones was almost lucky compared to Thelma Fleming, another Baton Rouge resident who pawned her jewelry, had her checking account shut down and lost her car trying to keep up with a string of loans she took in order to make ends meet after she lost one of her two jobs. “For me, it was devastating,” she said. “It got the best of me to the point where I considered suicide.””  (Zoë Carpenter, The Nation. June 27, 2014).

Payday loans may help, but at what price? “Almost half the borrowers are the people who are have fixed incomes, so they’re never going to have any more than they had this month,” Cook said. “Once they start down the payday loan route, they’re really trapped.” (Eric Schwartzberg, Journal-News. June 23, 2014)

Judgment Day for Payday Lenders  In a 2012 report, the watchdog organization Public Campaign found that the payday lending industry had spent more than $1 million during the previous decade to influence Missouri’s elections. In 2011, the legislature had voted to “cap” the APR for payday loans at 1,656 percent. “Members who voted for this pro-industry bill,” according to the report, “received nearly three times more payday money on average … than members who voted in opposition.” (Theo Anderson, In These Times, June 16, 2014)

McDaniel Files Suit Against Online Payday Lenders McDaniel’s suit says that the defendants issued short-term loans to Arkansas consumers with varying interest rates, but all loans had interest rates that were extraordinarily higher than the 17 percent limit set by state law. One loan had an annual rate of 782.14 percent. Others were 640 percent and higher. ( McDaniel Press Release, June 9, 2014)

Fast loans often come with high price tags  The company Hill used, Progressive Debt Relief, charged him a $25 fee for every $100 he borrowed. When Hill fell behind on monthly payments, the company, which required Hill to submit his bank account number before he could get any money, was able to draw the entire amount of the loan from Hill’s account. “They cleaned me out,” he said. (Susan Sharp, FME News Service, June 8, 2014)

Race-car driver’s payday lending business ‘deceived borrowers’ In a typical case, the company would tell someone borrowing $500 that they would only have to repay $650. But in reality, the company would rely on confusing language deep in the fine print to automatically renew loans borrowers thought they were paying off, the judge ruled. So a $500 loan could actually cost the borrower $1,925.  Navarro noted that the company’s own training material encouraged employees not to explain the true cost of the loan to borrowers.  (David Heath, Center for Public Integrity, June 6, 2014)

payday lobbyist

Payday Lenders Pay Premiums Of course, those weren’t the only ways Cash America and other payday lenders tried to elude the reach of federal investigators. As CREW chronicled in earlier reports, including Payday Lenders Pay More, released in 2011, the payday lending industry ramped up lobbying and campaign contributions over the past several election cycles while unsuccessfully attempting to ward off federal oversight and derail the Dodd-Frank Wall Street Reform and Consumer Protection Act. CREW’s latest analysis shows the industry is still spreading money around in hopes of limiting federal regulation of payday lending.  (David Crockett, Citizens for Responsibility and Ethics in Washington January 14, 2014)

Payday loan managers with Las Vegas ties to pay $100,000 in penalties The managers of an illegal payday loan business with operations in Las Vegas have been ordered to pay $100,000 in penalties and forfeit more than $1 million in outstanding loans, according to a final settlement announced by California regulators.  (Chris Sieroty, Las Vegas Review-Journal, December 25, 2013).

truth in lending crackdown on payday

Banks Must Stop Financing High-Cost Consumer Lenders Some of the retail storefront payday lenders financed by these banks lend those dollars back out to the community at rates of as high as 500%.This type of behavior is a net loss that outweighs many of the good things that banks do elsewhere in communities. (Adam Rust, BankThink Blog, December 16, 2013)

Cashing Out: The Usury Suspects, Part 2 “On average, repeat customers account for 40-50% of the Company’s annual loans,” the overview reads. “The Company’s average customer will borrow ~$1200 (~3 loans) and repay ~$2350 over a 4-year timeframe. Margins on loans to repeat customers average 150% higher than loans to new customers.”  To translate: The average person who takes out a loan from Kimball and Furseth ends up paying back double what he or she initially borrowed. Factor in the 500,000 loans that Evergreen Capital Partners says it has issued since its inception, and a picture emerges: Operators and investors can get pretty rich with a business model like this.  (David Hudnall, The Pitch, December 10, 2013)

How KC’s wealthiest enclaves became a shadowy nexus of predatory lending Over the next five years, Tucker, through CLK, is believed to have pioneered many of the shadowy hallmarks that now define the online payday-loan industry, such as constructing byzantine trails of front companies and merging with Indian tribes to provide his businesses with regulatory immunity. (Only the federal government can sue businesses on tribal lands. That makes it difficult for states to prosecute Tucker when his companies lend at interest rates surpassing the caps they have in place.)  (David Hudnall, The Pitch, December 3, 2013)

Payday lender Cash America fined over claims of robo-signing, gouging military members Problems at Cash America came to light when the bureau conducted its first exam of the company in 2012. Before the visit, examiners told the company to retain documents and call recordings for review. But bureau agents learned that employees were instructed to shred files and erase calls. Employees confessed that managers had also coached them on what to say to examiners, according to the compliant.  (Danielle Douglas, Washington Post, November 20, 2013).

payday vultures I Applied For An Online Payday Loan. Here’s What Happened Next “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis,” he told me. “That’s when the vultures come out.” (Pam Fessler, NPR News, November 6, 2013)

 The Payday Playbook:  How High Cost Lenders Fight to Stay Legal Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.  (Paul Kiel, Propublica, August 2, 2013, part of the Debt Inc. Lending and Collecting in America series)

Usury Cartoon RJ Matson St. Louis Post Dispatch Jan 12 2012

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Editorials Against Payday Lenders

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Editor’s note 2: If you’ve used payday, car title, or high-cost installment loans and would like to share your story with CRC so we can advocate against the damage these loans cause, please share it here.  It’s quick and easy and you could save others from financial heartaches. 

The Consumer Financial Protection Bureau is going to write rules about payday lending this year.   What have newspaper editorial boards around the country said about payday lenders?

Editorials about payday lending

 

1. The Consumer Financial Protection Bureau is barred by law from setting interest rates. But it can do more. It could help vulnerable, low-income borrowers by putting an end to deceptive advertising and balloon payments that make it impossible for borrowers to close out a loan. It could also force lenders to verify the borrower’s ability to repay before a loan is made. New York Times: Progress on Predatory Lending (Sept. 15, 2013)

2. It looks a lot like a game of Whac-A-Mole when it comes to regulating predatory lenders.  San Antonio Express News: Payday lenders remain creative (Sept. 18, 2013)

3. Some find the idea of “protecting people from themselves” odious. We don’t go there often, but consider this our nod to the notorious NASCAR rulebook acronym EIRI: “Except In Rare Instances.”  The Gadsen Times: OUR VIEW: Right move on payday loan database (Sept. 19, 2013)

4. Many unsavory ventures make their home in the seamy underbelly of the Internet, including some particularly unscrupulous payday lenders that use high fees and shady methods to drain borrowers’ offline bank accounts. The Los Angeles Times: Payday loans, online style (Oct. 13, 2013)

5. If lawmakers really want to distance themselves from the Calderon legacy, they should take a hard look at reversing some of its most egregious giveaways. One place to start would be the payday-loan industry.  Sacramento Bee: To separate themselves from Calderons, lawmakers should end payday loans (Nov. 5, 2013)

Where do payday lenders locate

6. “People get trapped,” charged Brian Rusche of JRLC. He painted a grim picture of borrowers so financially desperate and/or poorly informed that they take on debt burdens that exceed their ability to promptly repay. They frequently refinance their original loans, each time racking up additional fees that, industrywide, average $17 for every $100 extended. Repeat borrowers can wind up spending substantially more on interest than on the original principal, Rusche said.  The Star-Tribune: Better policing needed for payday lending (Nov. 15, 2013)

7. A March 2013 study by Tim Lohrentz, program manager for the Insight Center for Community Economic Development, an Oakland-based nonprofit, estimates that Fresno suffered a net economic loss of at least $3.6 million from payday lending in 2011. Fresno Bee: “Fresno should regulate new payday loan shops” (Nov. 19, 2013)

8. The U.S. Conference of Catholic Bishops and the Jesuit Social Research Institute at Loyola University in New Orleans have taken stances against these loan practices. Other faith-based groups in the state have also come out in opposition to the high payback rates. The Advertiser: Payday loans promote vicious cycle of indebtedness (Nov. 30, 2013)

9. Congress would do the country a world of good by revisiting the Military Lending Act and tightening the loopholes that have allowed payday lenders to continue to flourish. The payday loan industry invests a lot of its profits in lobbying efforts, but members of Congress have a chance to be heroes here. Shut down these high-interest loan sharks and give our servicemen and servicewomen a little protection from their predatory ways.  Rocky Mount Telegram: Congress should revisit payday loan law (Dec. 5, 2013)

10. The CFPB could establish some commonsense requirements such as requiring underwriting to ensure that a person receiving a payday loan can afford to pay it back, and limiting indebtedness to no more than 90 days per year to prevent loan churning. Florida lawmakers could also follow the lead of 17 states and the District of Columbia and put a double-digit rate cap on payday loans. If America’s fighting forces need protection from unscrupulous industry practices, why not the rest of us?  Tampa Bay Times: Protect consumers from predatory lending (Dec. 26, 2013)

payday borrower

11. The state’s sleazy payday loan industry, in general, and, in particular, those participants who gave tons of money to Swallow’s various campaigns and worked with the Swallow organization to destroy the career of a member of the Utah House, are a fit quarry for legislators’ justified rage.  Salt Lake Tribune: Legislature should take out its Swallow anger on payday lenders  (Dec. 29, 2013)

12. Those loans netted the lenders more than $34 million in fees — interest payments and charges for renewing a loan.That means a typical El Paso customer got a loan for $564, and paid the lender $387 for the privilege of having the money for less than two months. The El Paso city regulations will do little to dent the profit margins of these lenders, but will offer some additional protection for consumers. El Paso Times: El Paso City Council should affirm payday loan rules (Jan. 5, 2014)

13. To take someone with a gambling problem — or, more dangerously, the person who has a gambling problem but has yet to realize it — away from the human contact of the casino and into a situation where they can all too easily “get cash fast” without serious consideration of the terms and conditions of that loan is a step too far for us. Before any steps to legalize online gambling in Wisconsin, the Legislature should require that online gambling companies cannot also be in the business of online lending. The Journal-Times:  Casinos shouldn’t lend money (Jan 6, 2014)

14. Just as cities are increasing their efforts, the federal government also is wisely taking an interest in payday lending practices. The Consumer Financial Protection Bureau, a newly formed regulatory agency, recently reached a $19 million settlement agreement with Cash America, after the federal bureau alleged that the company improperly reviewed and signed documents in debt collection lawsuits, overcharged military customers and impeded a regulatory examination. More enforcement actions against other lenders are likely. Dallas Morning News: Cities need to stand up to payday lenders (Jan 10, 2014)

Liana 1

15. Face it — well-heeled people generally don’t seek payday loans. Dire economic circumstances often drive people to these lenders. Being a lender of last resort for many Texans doesn’t mean that this industry should profit so obscenely from these circumstances. There should be more limits. Needed: A Legislature with the political fortitude to take on the payday lending industry, not to mention a governor — whoever he or she may be — to ensure that the interests of Texas consumers are protected. San Antonio Express News: Consumers merely collateral damage (Jan. 16, 2014)

16. Part of the problem for consumers is that payday loans can carry almost 400 percent annual interest rates, and often the borrower is trapped in a cycle of debt with unlimited rollover of the loans, extending the terms and increasing the payback costs.  Star-Telegram: Texas payday lending needs more regulation (Jan. 23, 2014)

17. Now that major banks are bowing out of the payday lending business, the next change should be a cap on what now are usurious interest rates.  Sacramento Bee: Large banks get out of payday lending, at last (Jan 24, 2014)

18. Having enlisted soldiers subject to predatory interest rates in excess of 400 percent motivated the Pentagon to lobby the U.S. Congress to pass national legislation in 2006 to protect GI’s from the most egregious payday loan practices. Seguin Gazette: Regulate payday loans (Jan. 26, 2014)

19. Regardless of how these payday loan schemes are structured, they’re wrong. They hurt people who don’t need any more hurting. Our honorable Indian nations shouldn’t get caught up in this dishonorable business.  The Cap Times: Plain Talk: Tribes should stay away from payday loans (Jan. 29, 2014)

20. Too many Idahoans with few options are victimized every day by predatory lenders. It’s a shame that Heider and his colleagues don’t have the guts to do anything about it. MagicValley.com: Heider’s ‘Limp’ Bill Isn’t Payday Reform (Feb. 19, 2014)

21. Pennsylvania senators should resist the argument that offering constituents a somewhat better deal than Internet payday rates is a public service. That would be laughable, if not for the fact that so many legislators think it’s a swell idea.  The Express Times: Pennsylvania should resist the lure of payday loans (Feb. 28, 2014)

shark loopholes

22. Expect those friendly loan sharks to once again spend whatever it takes to stop them. It will likely be more than it took to get a friendly bill passed in the Senate that would actually make real reform more difficult. The House, however, can stop this. Our representatives should refuse to be part of this subterfuge. Instead, the legislature should consider outlawing or strictly regulating payday loans as 11 other states have done. News-Leader.com: Time for real loan reform (March 2, 2014)

23. Although they are often touted as short-term instruments to get borrowers through a temporary financial rough patch, the reality is that these loans often create an all but inescapable cycle of debt as borrowers roll them over or take out more of these high-interest loans in a doomed attempt to pay off existing ones. They end up paying staggering amounts of interest on initially small loans. It’s usury, plain and simple.  Montgomery Advertiser: Payday loan bill a chance to reform (March 5, 2014)

24. That so many Missouri lawmakers continue to sell themselves like cheap hookers — OK, expensive hookers — to the payday lending industry is a pox on the entire state. Having read the campaign finance reports, we have little hope that the Missouri House will have the integrity to say no to the Senate’s phony reform bill.  St. Louis Post-Dispatch: A phony payday loan reform bill. Because 1,950 percent is not enough (March 5, 2014)

25. Louisiana has many residents who live under financial stress. Our state has more residents working low-wage jobs and with limited access to banks than the nation as a whole, according to a report by United Way of SELA. Louisianians are more likely to be uninsured and less likely to have savings than other Americans, according to the United Way report. And on and on, Louisiana residents face numerous financial difficulties. To layer exorbitant and unaffordable loan fees on top of that is cruel — and works against financial stability. The Times Picayune: Legislature needs to rein in payday loan costs (March 7, 2014)

26. Payday loan stores abound in disadvantaged neighborhoods and, although they have been banned by federal law from operating on military bases, they continue to surround installations, such as Barksdale Air Force Base in Shreveport. They also have begun to crop up around college campuses, such as Centennary College, also in Shreveport.  The Daily Advertiser: Bill limiting payday loans a step in the right direction (March 18, 2014)

27. Montana placed an interest rate cap of 36 percent APR on its payday loans in 2011 and half the payday lenders in that state disappeared.  We’re just not sure that’s a bad thing. Maybe it’s time for Congress to cap interest rates on Internet payday loans.  Idaho State Journal: Payday loan or debt trap? (March 19, 2014)

28. Payday loans are a major issue here. Louisiana has more residents working low-wage jobs and with limited access to banks than the nation as a whole, according to a report by United Way of SELA. Louisianians are more likely to be uninsured and less likely to have savings than other Americans, according to the report. Exorbitant and unaffordable loan fees make families even more financially unstable. The Times Picayune: Exorbitant payday loan interest must be limited by Legislature (March 26, 2014)

29. The revelations about payday loans are consistently negative. People pay too much for too little financial help, they frequently become caught up in a cycle of taking out repeated loans with high interest rates, and meaningful reform seems but a fantasy.  St. Joseph News Press: Payday loan trap awaits real reform (March 28, 2014)

30. The payday loan industry is wealthy and has a powerful lobby. Toughening the law won’t be easy, but it’s the right thing to do. The Post and Courier: Pain persists with payday loans (March 30, 2014)

31. At a hearing on payday lending on Tuesday in Nashville, Richard Cordray, the director of the Consumer Financial Protection Bureau, described the case of a Pennsylvania woman who lost her job at a hospital and turned to what she thought was a short-term loan of $800 to pay the rent. After repaying more than $1,400, she is working two jobs, still in debt and being hounded by bill collectors.  The New York Times: What Lending Rules Should Look Like (March 30, 2014)

32. The industry argues that payday loans provide a useful service to help people manage unexpected and temporary financial difficulties. Maybe that’s how it works 15 percent of the time. But for the remaining 85 percent, it looks like this industry is grabbing someone’s billfold and not letting go. Savannah Morning News: Payday loans are sinkholes for wallets (March 30, 2014)

33. It’s true that no one forces people to take out these loans, but this industry is based on a business model that fundamentally puts people in a financial hole. Most loans are for less than $1,000 to cover emergencies like a car repair or a medical bill. And most are not repaid in full and on time. About 85 percent of payday borrowers default on the loan or take out another loan, resulting in crippling debt far beyond the original loan. Dallas Morning News: Cities are picking up the fight against payday lenders (April 10, 2014)

34. Perhaps the most surprising thing about Utah’s average 474 percent interest rate on payday loans is that there are six states with higher rates. Idaho, South Dakota, Nevada, Delaware and Wisconsin all have at least 500 percent average interest on payday loans.  The Salt Lake Tribune: Time to cap payday-lending rates (April 18, 2014)

payday vultures

35. For instance, why are they allowed to charge such high interest rates (in the worst cases as high as 700 percent)? Our state has laws against loansharking activity, making it a felony to lend at interest rates “exceeding 45 percent per annum or the equivalent rate for a longer or shorter period,” punishable by fines of $10,000 or one to five years in jail (RS 15:511). However, payday lenders have been exempted by the Legislature. The state also has usury laws that limit interest rates to 12 percent a year; again, payday lenders were exempted by legislative action.  The News Star: Don’t allow payday lending reform to languish (April 20, 2014)

36. The payday loan industry says such restrictions merely push customers onto the Internet for loans that cost even more. Pew studied that contention and found that in restrictive states, there wasn’t a big shift to online lenders. Instead, people cut their expenses or sought help from employers, family and friends. Those are all better choices than getting caught in a destructive cycle of short-term loans. People in these predicaments need credit counseling, not another loan.  The Spokesman-Review: Payday loan study shows Idaho needs new laws (April 22, 2014)

37. Businesses, some owned by large financial institutions of Wall Street-stature, literally suck the poor dry through “payday loan” shops, or “car title loans,” “rent-to-own” stores, or even “refund-anticipation” loans after taxes are done. Standard Examiner: Our View: Payday predators (April 25, 2014)

38. If you’re looking for fast cash in Dothan, you’re in better shape than if you’re looking for fast food – there are more title pawn and payday loan outlets in town than McDonald’s restaurants. dothaneagle.com: Loans at 456 percent interest (May 9, 2014)

39. Amid a deluge of lobbying from national payday lending operations, the Legislature in both chambers has shown a reluctance to tighten the sky-high interest rates and fees paid by customers of the short-term loan outlets.  The New Orleans Advocate: Fair play for loans (May 10, 2014)

40. Loansharking used to be a pretty good racket for organized crime. People borrowed money from hip-pocket bankers, and those who didn’t repay their loans with exorbitant interest tacked on had to face the shark’s leg-breaker. But in Alabama, who needs loan sharks? Predatory lending is legal in many forms here — minus the muscle, or so we hope. Tuscaloosa News.com: Usury bill would lend a hand to many in Alabama (May 24, 2014)

41. This is a major victory because it proves that cities aren’t powerless against the proliferation of payday lenders or their most exploitative practices. Major cities that haven’t taken a stand against payday lending excesses — including Fort Worth, Irving and Arlington — have no excuse for further inaction. Dallas Morning News: Dallas’ payday ordinance wins in court (May 30, 2014)

42. Lawmakers should take note. Communities feel so strongly about keeping payday lenders at bay that they have rewritten zoning laws so new ones can’t pop up. The change doesn’t get at the crux of the problem.  The Des Moines Register: Payday loans need a legislative solution (May 31, 2014)

43. The best solution to the problem is for the state to regulate these types of businesses. Lawmakers, whose political campaigns are heavily financed by the payday loan industry, have lacked the will to take them on. Until they develop the political fortitude to tackle the job, it will be up to individual city councils to take on the jobs the members of the Texas Legislature have been shirking.  San Antonio Express News: Payday rules merit tough stance (June 3, 2014)

44. Considering Statehouse inaction, it’s appropriate that Democratic U.S. Sen. Sherrod Brown of Ohio is asking the federal Consumer Financial Protection Bureau “to write rules for small-dollar loans that will fill the gaps left by inadequate state laws.” The Plain Dealer: Past time for Ohio lawmakers to close payday-lending loophole

Utah Payday Lender cartoon

45. Let’s start with SB 694, the odious lending “reform” bill, which sailed through the Missouri Senate with tacit support from the payday lenders. That was a telltale clue; a real reform bill would have the industry’s lobbyists screaming like stuck pigs. The industry didn’t spend $1.6 million on lawmakers’ campaigns between 2003 and 2012 to have them institute real reform.  St. Louis Post-Dispatch: Unscrupulous lenders take it on the chin for a change (July 14, 2014)

46.  In the case of ACE, the company actually trained its in-house debt collectors using a manual that explicitly instructed them to “create a sense of urgency” in borrowers who had exhausted the money they had been lent and who lacked the ability to repay. At that point, the manual said, the collectors were to offer the delinquent borrower the option of refinancing or extending the loan. Even after borrowers said they could not afford to repay, the company pressured them into taking on more debt. Every new loan meant the borrowers paid new fees. New York Times: Payday Lenders Set the Debt Trap (July 19, 2014)

47.  The cycle-of-debt problem is acute throughout North Texas, and particularly so in low-income neighborhoods. While many major cities —Dallas, Austin, El Paso, Garland, Houston and San Antonio — have enacted tougher rules, our region badly needs Fort Worth, Arlington and Irving to join the reform fight. If this trio of cities would enact tougher lending rules, it would help deliver a powerful message to state lawmakers that payday lending abuses must end. Dallas Morning News: Feds turn up the pressure on payday lenders (July 20, 2014).

48. There are multiple databases in use, with no assurance that a would-be borrower is listed in the one a lender might choose to use. That creates the possibility of multiple loans that exceed the cap and that can create an all but inescapable cycle of debt. It’s a lucrative arrangement for the lenders, to be sure, but all other effects are detrimental. The Banking Department was right to step in with the regulation after repeated efforts to pass reform measures in the Legislature were thwarted by the clout of industry lobbyists. Montgomery Advertiser: Payday lenders ruling correct (August 13, 2014).

49. Normally, a free market void of government intrusion is preferable to mandated rules and regulations that can stifle business. However, in the case of payday loans and auto title loans — with exorbitant interest rates that can drag down a consumer far more than a credit card — some form of regulation is necessary. Amarillo Globe News Speak up on payday loans  (August 25, 2014).

50. From “refund anticipation loans” during tax season to “rent to own” appliances, numerous businesses turn a profit on the backs of the poor. Unfortunately, too many members of the Iowa Legislature don’t seem to care.  The Des Moines Register: It’s time lawmakers deal with payday loans:” (August 28, 2014).

51. The payday loan industry has flourished virtually unchecked in Kentucky for far too long, luring customers — often impoverished or desperate — with quick cash at a very high cost. The Courier Journal: More restrictions on payday lending (Sept 1, 2014).

ACE Cash Express

52. Many of these borrowers don’t live below the poverty line; they are folks who have hit a bump in the financial road and need short-term help. But a trip to the payday lender can turn that bump into a mountain of money problems.  The Dallas News: Finding innovative alternatives to payday lenders (Sept. 14, 2014).

53. Payday lending expanded significantly during the 1990s, when many states unwisely exempted the lenders from usury caps. Since then, many states have seen the light, but not nearly enough. Resourceful payday lenders have also managed to evade even tough state laws by setting up shop elsewhere or using the Internet. It’s clearly time for a national standard. The New York Times: A Rate Cap for All Consumer Loans (Oct. 18, 2014).

54. There is a dire need for small loans and grass-roots alternatives to payday lending. In time, the BCL program could grow and take a real bite out of the industry. That’s why nonprofits, employers and philanthropic organizations would be wise to support an operation like this one. The Dallas Morning News: Ending the payday lending cycle (Oct. 22, 2014).

55. What’s insidious about this business is that while claiming to a short-term lender to help people through a temporary cash crunch, their business success is really predicated on rolling the loan over and charging additional service fees. In a typical situation, borrowers provide a lender with a personal check dated for the next payday or permission to debit their bank account two weeks later, with a finance charge added. But the loans rarely end at that point. Instead, the borrowers often roll the loans over several times, racking up fees in the process. The typical payday borrower will pay more than $450 in fees for a $350 loan, according to experts in the field. Herald Review.com: `Payday’ loans need more regulation (Jan. 28, 2015)

56. Oddly, or perhaps tellingly, the opposition to Orr’s bill was led by a Democrat, Sen. Roger Bedford, of Russellville, who failed to retain his seat in November’s election. Bedford’s concern: He feared the move would “put people out of business.” One could argue that this is an added benefit, as horror stories of young mothers losing cars and being haunted by a single loan for years have become commonplace. With that in mind, the Consumer Protection Agency is drafting regulations that could cover a wide range of short-term loans. The federal government is stepping up because states have not. Decatur Daily: Payday loan centers prey on desperation (Feb. 11, 2015)

57. What this ignores is that people make mistakes — and that the industry likes to help them do so. Most borrow too much, forcing them to extend repeatedly, racking up fees and interest that far exceed the principal. Some lose the cars they need to get to work, or they struggle to pay rent after lenders make their electronic withdrawals. Bloomberg: No More Payday Predators  (Feb. 19, 2015).

58. The payday loan industry preys on the poorest working Americans, who take cash advances and often find they can never catch up with debts that keep spiraling higher. In much of the United States, payday lenders reap huge profits by charging triple-digit interest rates and high fees, all the while sending borrowers into an inescapable cycle of debt.  The Boston Globe: Hit payday lenders with new rules — and new competition (Feb. 23, 2015)

59. Having members of the community sink deeper into debt helps no one other than the few who take advantage of real need or bad judgment. If our state legislators won’t step up to the plate on this one, maybe the CFPB will.  The Free Lance Star: Rein in payday loans (March 1, 2015)

60. The Jacksonville City Council is considering rules that would make it more difficult for payday lenders to operate within its city limits. Like many other Alabama cities, Jacksonville is left to cope with results of state laws that — despite recent small steps of reform — loosely regulate payday lenders and that, in the words of Councilwoman Sandra Sudduth, “prey on low-income people.” The Aniston Star: Preying on people (March 10, 2015).

61. Payday lenders survive by playing a game of cat and mouse. As individual municipalities crack down, lenders battle in court, use campaign contributions to defeat legislation or simply set up outlets outside of city limits. The Dallas Morning News: Ending payday lenders’ game of cat and mouse (March 15, 2015).

62. Ferguson said a $700 loan under the new law would cost $1,195 to repay — or $400 more than the $795 repayment under current rules. He noted that consumers already may convert payday loans to installment plans of up to 180 days with no additional fees, and that DFI reports that almost 15 percent of borrowers already do that. The Olympian: Payday lending bills bad for the poor (March 17, 2015).

63.  News of the draft rules prompted a predictable outcry from the short-term loan industry but also worries from consumer groups that the regulations permit too many loopholes. We have seen in Missouri that overly permissive payday lending leads to debt traps. As regulators refine their rules, they should lean more toward toughness. The Kansas City Star: Tougher Lending Rules Are Welcome (March 26, 2015).

Cartoon - Shark Infested Waters

64. Alabama has suffered from a predatory lender problem for years, and the state Legislature hasn’t solved it. A few well-intentioned lawmakers have tried to push bills through the Statehouse that would cap that interest rate at 36 percent. We’ve championed those bills for years. But they haven’t passed. The Aniston Star: Usury in Alabama – end it (March 27, 2015).

65. Given that they are seemingly everywhere — Obama said Alabama has more four times more payday loan businesses than it does McDonald’s franchises — it would seem obvious that even the high default rate doesn’t keep them from being profitable. Obama says there’s nothing wrong with a business making a profit, and we agree. We also agree that if that business is “making that profit by trapping hardworking Americans in a vicious cycle of debt,” as he said Thursday, then something needs to be done — probably at both the state and federal level. The Gadsen Times: Payday loans still an issue (March 28, 2015).

66. A truly strong rule would require short-term lenders to examine the prospective borrower’s ability to repay, without exception, and make sure that all loans carry reasonable costs. Lenders would earn less profit. But far fewer working-class borrowers would be bled dry and driven into bankruptcy. New York Times: Progress on Payday Lending (March 28, 2015).

67. Payday Lending is capitalism at its unloveliest. It’s a business that wouldn’t even exist if the market were providing everyone with enough income to meet their needs — yet 12 million adults, the vast majority of them low-income, resorted to short-term, high-interest loans to cover cash shortages in 2010. The Washington Post: Payday lending is ripe for rules (March 29, 2015).

68. We believe in a free market. But we also believe that society has an obligation to make sure people aren’t taken advantage of. The interest rates being charged by payday loan businesses are excessive and predatory. Short-term lenders say they are necessary if their businesses are to make a profit. If that’s the case, we agree with Obama: They need a better business model. Tuscaloosa News: Something to agree with Obama about (March 29, 2015).

69. In one case, as Herring noted, a Mechanicsburg couple took out a $2,100 payday loan four years ago. They’ve paid more than $15,000 in interest and principal, yet still have an outstanding balance, according to the lender. “Some of these loans are little more than financial quicksand, designed to fail from the second they’re made,” Herring said. “Virginians deserve better, and I’m going to use the resources and authority of my office to make sure they get it.” The Virginia-Pilot: Putting brakes on predatory lenders (March 30, 2015).

70. When someone needs to take out a loan in order to make payments on a loan he’d received to keep up on an earlier loan, he’s on a terribly rocky road. And yet, that describes the situation – the best-case scenario – for fully 45 percent of those who take out a so-called payday loan, those frequently touted short-term offers meant to get people out of an unexpected scrape, to pay an unanticipated bill, and then move on with their lives. Except that what most folks move on to is another loan. And still another after that. The Republican: Proposed payday lending curbs would end the worst abuses (March 30, 2015).

71. Payday lenders require borrowers to agree to give them post-dated checks or debit authorizations as a condition of the loan. But once payday lenders get into a customer’s checking, savings, or prepaid account, getting them out can be a nightmare. Consumers end up with unanticipated withdrawals or debits, transaction and insufficient fund fees, all of which add to the overall cost the loan. The Dallas Morning News: Feds target abusive payday collection practices (March 30, 2015).

72. Payday lenders have established themselves as a powerful political force. They make a lot of money and they invest a lot of it in politicians, both at the federal and state levels. It either fights off regulation, as it has done continually in Missouri, or it becomes a shape-shifter. St. Louis Post Dispatch: Going halfway in reining in the payday predators (March 30, 2015).

73. The bureau says more than 80 percent of these loans are rolled over or renewed within two weeks, generating more fees for lenders. More than 70 percent of the loans are for basic expenses, not emergencies. Forth Worth Star-Telegram: Payday loans could face repayment test. (March 30, 2015).

74. The Consumer Financial Protection Bureau has finally turned its regulatory gaze to short-term lenders — think payday loan and automobile title loan companies — that build businesses around loans that can’t be repaid. Los Angeles Times: A chance to rein in payday loan abuse (March 31, 2015).

75. In 2008, Ohio made efforts to stymie the industry’s rise, but payday lenders found a loophole in the law that allows them to continue operating. Lawmakers have yet to fix their mistakes. The Independent: Federal agency introduces rules for lenders (March 31, 2015).

75.  Senate Bill 5899 takes the “payday” out of payday lending by converting the product to … installment loans. But these would be more expensive loans for the many borrowers who take out a six-month loan, the only kind that would be allowed. The total cost of a $700 loan could balloon to $1,195. The cost for some of those who do not take the full six months to repay would be lower, but the bulk of the industry’s customers would still end up paying more. The Spokesman Review: Loan bill unfair to vulnerable Washington state borrowers. (April 1, 2015).

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76. Like locusts in a biblical plague, Alabama is overrun with predatory lenders because lawmakers lack the intestinal fortitude to do anything about it. The Anniston Star: Alabama’s lending scourge. (April 1, 2015).

77. Meanwhile the CFPB plan to curb payday lending at the federal level is promising in that it would require that payday lenders verify borrowers’ incomes before approving a loan. If someone clearly cannot repay a loan, he shouldn’t be given one. The Post and Courier: Protect consumers from loan predators (April 7, 2015)

78. The majority of borrowers are working-class people strapped by debt or facing immediate cash needs. It is unfortunate that people find themselves in such situations, with nowhere else to turn, but acting in a financially responsible manner is a two-way street. Payday lenders should be required to engage in responsible lending practices, which do not include luring borrowers into a bottomless pit of obligation. Desert News: Payday lenders should be required to practice responsible lending (April 9, 2015)

79. Alabama would be foolish to shut down legal industries that provide worthwhile services. But if payday lenders can’t survive by charging fair interest rates to their customers, that doesn’t mean the state should continue to allow predatory banking practices within its borders. The Anniston Star: A bad model for payday lenders. (April 9, 2015)

80. Largely, the purpose of payday loans is for someone to borrow more money than they can afford to pay back at the end of the term and then to re-borrow all over again. It’s this practice that’s led to both our neighboring states Georgia and North Carolina essentially bannning predatory payday loan businesses. Aiken Standard: Add greater protections from unaffordable loans. (April 10, 2015)

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81. Lenders should be ashamed of preying on people in such dire straits that they are willing to agree to triple-digit interest rates — and so should the conservative groups supporting the lenders in a public relations campaign. No matter how you dress it up, usury is wrong. Hartford Courant: CT Right To Crack Down On Online Loan Sharks (April 13, 2015).

82. There is a dirty little secret about payday loans: The typical borrower owes past loans an average of 212 days, taking out one loan after another — up to eight annually in Oklahoma. The payday loan industry comes out the winner, raking in $435 billion in fees nationally each year. Tulsa World: Payday loans and the president (April 14, 2015)

83. Opting for a different legislative solution is one thing. Passing a bill out of committee that includes interest rate reform, but sending a different version of that bill forward for a full House vote is quite another. Rep. Luke owes her colleagues and constituents some answers. House and Senate conferees, meanwhile should fix the mess and reinsert a reasonable interest rate cap in this long-overdue reform measure, one that protects the interests of some of Hawaii’s most vulnerable consumers. Honolulu Civil Beat: Luke’s Bait-and-Switch on Payday Lending Must be Fixed. (April 16, 2015)

84. Requiring someone with limited financial savvy to mentally amortize a loan over time and factor in all possible fees and costs is as unfair as charging 1,000 percent interest rates. Wouldn’t it be better to let consumers know up front the worst-case scenario so they can make an informed decision on whether to get the loan from a storefront? Or not?   Albuquerque Journal: Loan reforms should have consumer clarity at core. (April 17, 2015).

85. This month, 57 leaders of foundations, including The Pittsburgh Foundation, signed a letter urging the consumer bureau to get tough on payday lenders. If the lenders sincerely desire to help, not exploit, struggling consumers, they should not fight reasonable regulation. Pittsburgh Post-Gazette: Humane lending: Payday loans need stiff regulation from Congress. (April 22, 2015).

86. And as the Kennebec Journal noted, Advance America has paid millions to settle allegations of illegal lending practices, such as providing payday loans at rates as high as 368 percent in Pennsylvania – which caps small loan rates at about 24 percent. When Bruce Poliquin was named to the House Financial Services Committee, he declared that one of the duties of government is “to protect our consumers during their everyday lives.” Now that the government is poised to put more consumer protections in place, Poliquin should be held accountable for putting these words into action. Portland Press Herald: Payday loan limits pose quandary for Poliquin (April 22, 2015).

87. We understand their desire to preserve the status quo and limit oversight. Payday lenders in the U.S. take in about $46 billion annually. The industry is practically a money-printing machine. We’ve said repeatedly that we don’t want to put those folks out of business. We just want a fair playing field where desperation doesn’t mean a disadvantage. The Gadsen Times: Payday loan database ruling a victory for consumers (April 29, 2015)

88. Payday and title-loan lenders who charge customers exorbitant interest rates are nothing if not morally criminal. The well-to-do don’t usually frequent those places. Instead, it’s everyday Alabamians who often feel they have no choice but to risk a loan from a payday lender. Aniston Star: Do what’s right, Alabama, about predatory lending (May 4, 2015)

89. There are issues that come up again and again in the Texas Legislature, enjoy broad support, maybe even make their way through the House or the Senate — but never make it into law. Take attempts to reform payday lending, for example. Austin American Stateman: Pass stiffer rules on payday lenders (May 4, 2015)

90. Three bills are in the Statehouse now that would cap interest rates and give borrowers, who pay annual interest rates between 400 and 500 percent, more time to repay their loans. But the bills have sat largely dormant while our legislators discuss other priorities large and small. TimesDaily.com: Predatory lending law not likely this session.  (May 8, 2015).

91. In Washington last week, Russell Moore of the Southern Baptist Convention’s Ethics and Religious Liberty Commission called payday loans “a form of economic predation [that] grinds the faces of the poor into the ground.” Fort Worth Star Telegram: “Another chance in Austin on payday lending.” (May 15, 2015).

92. That’s because these loans almost inevitably end up as a gateway to more debt; in Virginia, state data has shown, about 80 percent of customers take out a second loan to repay the first. Virginia Pilot: Taking aim at predatory lenders (June 4, 2015)

93. Texas cities must be part of the solution, too. In the absence of state action to regulate abusive payday lenders, cities owe it to their residents to continue to lead payday lending reform in Texas. Dallas is among a coalition of more than 20 cities statewide that have passed zoning and other ordinances to limit abusive payday lenders. Dallas Morning News: Dallas charity takes steps to help end the payday-loan debt cycle (June 21, 2015)

94. The unfolding legal actions against the online lenders must also be noticed in Topeka, Jefferson City and Washington. Too many politicians from Missouri and Kansas are beholden to traditional and online payday lenders who have contributed to their campaigns. The Kansas City Star: Crackdown on payday loan scams is welcome (July 12, 2015)

95. Charles Cline of Dayton said he’s been stuck in the payday lending trap. He said he took out a $1,000 loan and ended up paying $1,600, because of extensions, fees, and interest. “Trying to help yourself get out of a bad situation, you end up hurting yourself more,” Mr. Cline said. “They are preying on people that are poor, that are less fortunate, that need to get by throughout the week.” The Blade: High interest loans cripple Ohioans (July 21, 2015)

96. The government-to-government relationships between Indian tribes and states are sometimes delicate and nuanced, a balance of sovereign powers. But when a tribe comes into another state to break its laws, it has gone too far and should be penalized. Hartford Courant: Out of State Tribal Loan Sharking Shouldn’t Fly in CT (Sept. 14, 2015)

Payday Loan Report

97.The new rules are a welcome move but, regrettably, they do not apply to loans made to the general public. Some cities, such as San Antonio, have passed local ordinances to curb the predatory lenders’ unscrupulous practices, but the issue would be best addressed by state lawmakers. Sadly, the Texas Legislature lacks the political fortitude to take on the powerful payday loan industry and protect the consumer. San Antonio Express News: Military Payday Loan Rules Welcome (Sept. 16, 2015)

98.Unfortunately, Virginia’s laws and regulatory structure create an environment primed for loan sharks to tempt unsuspecting, cash-strapped customers and then squeeze them for thousands of dollars. As Herring and others have noted, some customers end up paying far more in interest than they ever owed in principal yet still end up losing their car for missing a payment. Virginian-Pilot: Another eye on predatory lenders (Sept 18, 2015).

99. And if that’s the case, they’re ripe for the plucking. They’ll hand over their car title in return for a two-year loan that averages $1,112 and carries interest rates of between 96 percent and 180 percent. Roughly 1 in 5 of them will wind up forfeiting his vehicle because he can’t make the payment, even after taking a second or third loan that compounds the problem. St. Louis Post Dispatch: Whatever they call themselves, payday lenders are a scourge (Sept. 22, 2015).

100. More than 45,000 people in Utah who took out payday loans last year were unable to pay them off within the agreed-upon time frame, a stunning number, but one that shouldn’t be surprising given two factors. First, payday lenders thrive by luring customers into a cycle of perpetual debt and, second, they can get away with it under Utah’s relatively lax regulations. Desert News: Utah payday loans lead many to debt trap (Oct. 15, 2015).

101. It’s time to put the best interest of Missourians ahead of lucrative loan companies that, for the most part, are not even based in Missouri. They swoop in from other states to take advantage of Missouri’s lax oversight, springing up like so many fast food restaurants in areas where people are cash-strapped. SpringField News Leader: State should enact real reform (Oct. 31, 2015).

102. The General Assembly, in failing to close payday loan loopholes, is all but declaring that 20-odd lobbyists carry more weight in Columbus than 3.4 million Ohio voters. Is that really a message that House Speaker Clifford Rosenberger and Senate President Keith Faber want to send?   The Plain Dealer: Curb Ohio payday lenders who continue to defy voters’ will (Nov 11, 2015).

103. Getting once-reluctant Arlington council members to oppose the political clout of the payday industry is no small achievement. Fort Worth, Irving and Arlington represent the home turf of two of the nation’s big payday lenders, Ace Cash Express and Cash America, both of which cast a large shadow.  The Dallas Morning News: Arlington shows courage on payday lending (Nov. 12, 2015).

Payday Lenders Going out of Business

104. Closer to home, worthy local efforts have sought to develop alternatives to payday and car title lenders. The lenders are right to that extent: There is a need for such financial help. What should not be permitted is rank exploitation of the vulnerable, something Ohio once declared emphatically, only to have the call neglected and ignored.  Akron Beacon Journal: Payday lending still surges in Ohio (Nov. 15, 2015).

105. Lawmakers have a choice: they can continue to kowtow to an industry that preys on the poor or they can do what’s responsible and protect those who too often are susceptible to the industry’s quick-cash scams. Canton Repository: Payday lenders continue to gouge borrowers  (Nov. 22, 2015).

106. “The total lent to her was less than $800,” Field said. “It cost me over $12,000 to extricate her from that. A good portion of that went to payday lenders, but there was a good bit of collateral damage as well. These folks had access to her bank account, they made withdrawals, checks bounced, overdraft fees accrued, utilities were cut off and had to be re-established, a rent check bounced. If you don’t have a dad to come bail you out and you get into this, you’re sunk.” Waco Tribune-Herald: Regulating predatory practices of payday lenders should be discussed, debated (Nov. 29, 2015).

107. “Payday lenders say they provide a service to people who need quick money. What they don’t say is that paying 400 percent interest on loans that roll over and pile up debt at the speed of light is anything but a service.” The Dallas Morning News: Taking a bigger bite out of payday lending (Dec. 3, 2015)

108.  “Members of the Utah Legislature have attempted to put limits on interest rates, collection tactics and other excesses of payday and signature loan operations. Which is difficult, given how much money the legal loan sharks pour into lobbying and campaign donations and how easy it is to get around laws that are aimed at specific kinds of financial transactions by inventing a new kind.” The Salt Lake Tribune: Payday loans are no gift (Dec 23, 2015).

109. “According to an October report from the Utah Department of Financial Institutions, over 45,000 loans were not repaid in full at the end of 10 weeks. The Salt Lake Tribune recently found that this resulted in at least7,927 lawsuits from payday lenders against delinquent clients from July 1, 2014, to June 30, 2015. And since the average payday loan carries an interest rate of 482 percent, these lawsuits were often seeking sums that were exponentially larger than the amount of money that people originally borrowed.” The Salt Lake Tribune: Nearly 8,000 lawsuits by payday lenders against their clients (Jan 1, 2016).

110. “One would institute a 36 percent rate cap on all installment loans, even when they are more than $2,500. Yancey also proposes a bill that would limit open-ended credit agreements by requiring the firms offering them also sell actual consumer goods. In another bill — an attempt to crack down on the increasing “bait-and-switch” tactics — lenders who offer payday or car title loans would be barred from offering installment loans or open-ended agreements.” Daily Press: “Quick loans take hostages” (Feb. 2, 2016)

111. “And they outline the utter incongruity of local business leaders, churches and nonprofits coming together in an unprecedented way to battle chronic poverty while payday lending continues to plague borrowers ignorant of the high costs involved in patronizing such establishments. One can see why the Citizens for Responsible Lending movement has gained such momentum, even as state officials have twiddled their thumbs.”  The Waco Tribune-Herald: In the wake of state, federal failures, cities must step up with lending reforms (Feb 5, 2016).

112. The collapse of Kansas City’s payday loan bubble under the squeeze of federal enforcement has broken up families and caused rifts in churches, country clubs and executive suites. Too many people and institutions here were too quick to embrace the new “entrepreneurs” when they showed up with fancy cars and quick cash. Too many people didn’t want to think about the misery at the other end, as consumers were harassed to pay interest and fees they couldn’t possibly afford. Now it’s payday, all right. And it should serve as a cautionary tale.  The Kansas City Star: The rise and fall of Scott Tucker and other payday lenders is a sobering Kansas City story (February 12, 2016)

113. This newspaper has long called for continued crackdowns on these payday and auto title lenders. The lenders say they provide a service to people who need quick money. But some also charge 400 percent interest on loans that roll over and pile up perpetual debt. It’s a cycle that keeps poor people poor. The Dallas Morning News: Cane’s opening signals progress in southern Dallas (February 20, 2016).

114. Glenda Wood of Bellevue told state senators that when she and her husband took out a $500 payday loan for tires they “kind of got trapped in this cycle of basically just renewing that same loan over and over again, just paying the fees and not paying back the loan itself.” Lincoln Journal Star: Improve payday loans (February 20, 2016)

115. The 2000 law capped annual interest rates on title loans at 30 percent. It barred lenders from imposing finance charges, fees and prepayment penalties. It prohibited them from selling new or used vehicles, auto parts and insurance. It required them to accept partial payments.  But unscrupulous lenders eventually figured out they could steer around those strong protections by becoming licensed under Florida’s consumer-finance law and pushing “voluntary” insurance and other expensive add-ons of dubious value to raise the cost and effective interest rate of their loans.   Orlando Sentinel: Launch new crackdown on title-loan abuses (February 27, 2016)

116. While payday loans often involve small amounts, they usually end up creating a pile of debt for unsuspecting borrowers through sky-high interest rates on loans that roll over quickly. Consumers who aren’t able to make full payments take on debt and fees they can’t repay. Eventually, such financial troubles hurt neighborhoods and can keep working-class borrowers from a better financial future, a point Ishihara and other supporters made well as they campaigned for passage. Longview News Journal: Longview made right choice on managing payday lending industry (March 2, 2016)

117. Those dots don’t connect. Democrats can’t purport to be the party that champions consumer rights when their chairwoman is aggressively working to leave consumers at the mercy of an industry whose business model is to lure low-income people into debt traps. The Kansas City Star: It’s ridiculous that the leader of the national Democratic Party is protecting payday lenders (March 4, 2016)

118. Instead of helping the industry prey on Kentuckians, lawmakers should be requiring payday lenders to abide by the same 36 percent interest rate cap as other lenders, as 11 states already do and Senate Bill 101 proposes. And regulators should be encouraging banks to get back into the small-loan business. Lexington Herald Leader: Kentucky Needs a Raise, not a New Debt Trap (March 8, 2016)

119. The latest product that would be created by HB 520 is a risky lending product named “Flexible Credit Loans,” or “Flex Loans” for short. Consider the harm this can do. After making payments on a $500 loan for 12 months, a borrower will pay over $1,000 — and still owe $270. The bill also allows payday lenders to keep people in debt for thousands of dollars for months, perhaps years. The Times Leader: Payday loan bill needs quick death  (March 9, 2016)

120. Orr’s bill could come up for a vote this week, but it won’t be a surprise if it’s either delayed again or if it’s defeated. Alabama legislators pay a lot more lip service to helping citizens than they do to actually acting on legislation that might break the cycle of poverty, even with a bill that doesn’t involve new taxes. Orr’s bill might not be a perfect solution, but allowing 400 percent interest on loans to the people who can least afford to pay the rate borders on criminal. It’s time for a change. The Gadsen Times: Time for change on payday loans (March 14, 2016)

121. But those who avail themselves of this service likely are unable to get a traditional bank loan and already are in a financial bind. Perhaps even desperate – needing to fix an aging car to have transportation to a low-paying job, is just one example — they often wind up in a debt trap, taking out a new loan to pay off the preceding one. Since most payday loans must be repaid in their entirety within two to four weeks, this rollover cycle can continue indefinitely, during which the lender can add fees.  Tuscaloosa News: GOP has no excuse on payday loan bill (March 22, 2016)

122. It’s a small but important step, and lawmakers should make its passage a priority, not only for Alabama’s poor, but for all residents who ultimately bear the cost of these business practices. Dothan Eagle: Another swipe at short-term lending  (April 7, 2016)

123. The goal, says JIFFI CEO Jack Markwalter, is “to create a financially inclusive environment in the South Bend community.” That’s in sharp contrast to some of the horror stories you’ve probably heard about payday loans, which are typically taken out by people who have poor credit that prevents them from obtaining traditional loans with lower interest rates. Critics call the loans debt traps that create a cycle of borrowing, repaying and re-borrowing — with fee after fee — that result in a whopping annual percentage rate of 391 percent. South Bend Tribune: Loans that won’t break the bank (April 13, 2016)

124. Here’s the reality about payday lenders in Alabama: They charge exorbitant interest rates and the state Legislature thus far is too weak-kneed to rein them in. Lawmakers allow it to happen. They should be ashamed. The Anniston Star: Rein in the payday lenders in Alabama (April 20, 2016).

125. Payday loans should be a one-time occurrence to get you back on your feet. Under today’s rules they are a trap that many cannot get out of, and the original debt can get more than quadrupled by interest. WTVM: Payday Loans  (April 21, 2016).

126. What really needs to happen, of course, is for state legislators to pass laws to control how payday lending works in Texas. Had this ever been done, Longview would not have had to take action on its own. Given that the Legislature is not likely to act — it has declined to do so before — we need to be responsible enough to take control. That’s exactly what the Longview City Council did with its ordinance, and we are grateful for that. Longview News-Journal: Program is worth a look as way to loosen grip of payday loan predators (April 27, 2016).

127. “The payday loan business model makes extraordinary profits by locking people into a cycle of debt,” said Sen. Joe Bolkcom, D-Iowa City. He has repeatedly introduced legislation intended to protect consumers, but his efforts got nowhere due to a lack of support from other lawmakers. “Every single loan is a rip-off. Borrowers are generally low-wage earners living paycheck to paycheck. In Iowa they would be better off getting loans from loan sharks. They would find better terms from loan sharks,” he said. The Des Moines Register: State must do more to stop payday lending (May 28, 2016).

128. You would think that lenders would do this sort of “underwriting” anyway, but payday lenders don’t because they can extract payment from the borrower’s account ahead of other creditors. And if the borrower’s checking account doesn’t have enough to cover the debt, lenders typically roll over the principle into a new loan and tack on more fees. Such rollovers are common; more than half of payday loans are issued in sequences of 10 or more consecutive loans.  Los Angeles Times: Payday loans are often a last resort for the poor. That doesn’t mean they should be exploitative (June 2, 2016)

129. Most people ended up paying more in fees than the amount they borrowed. In other words, the system is expressly designed to bleed borrowers, who are typically struggling workers or people on fixed incomes who are just getting by. New York Times: A Lame Response to Predatory Loans (June 2, 2016)

130. If these lenders hadn’t left so many victims in their wake, their assertions of innocence might almost be believable. But it’s because they’ve behaved so abominably that federal regulators are now justified in intervening. St. Louis Post-Dispatch: Crackdown is comeuppance for payday predators (June 2, 2016)

131. Mosquitoes, leeches and vampires get a bad rap, but there’s another variety of blood sucker with a voracious appetite for unsuspecting victims: payday lenders who loan consumers relatively small amounts of money for short periods of time only to suck up those dollars and much more by trapping them in expanding levels of debt through ruinous fees and interest rates. The Baltimore Sun: Fleecing the Poor (June 2, 2016)

132. In their absence, people turn to other sources. These include borrowing from friends or co-workers, asking for help from charitable institutions, negotiating with landlords and creditors for an extension on payments, and availing themselves of pawn shops. None is a perfect solution. But they are preferable to being pulled into an exploitative debt trap. USA Today: Will Payday Lending Rules Pay Off?  (June 3, 2016)

133. The bureau says about 80 percent of payday borrowers cannot afford to pay off their loans when they are due, so they take out a new loan and incur new fees. “It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey,” said Richard Cordray, the agency’s director. Forth Worth Star Telegram: “Payday loans are debt traps that need constraints” (June 3, 2016)

134. “Even the term “payday loan” is often a misnomer. It implies that the consumer will be given only enough money that they can quickly repay, with minimum interest, when their next payday arrives. Kansas City Star: “Get tougher in reforming the disgraceful payday loan industry” (June 3, 2016)

135. “Payday lenders — businesses offering small, short-term, high-interest loans — serve a purpose. They, at least in theory, provide cash-strapped folks who don’t have strong credit access to cash to tide them over until their next payday.  Unfortunately, that single loan too often spurs more loans to pay off the original debt — plus interest. This can turn a short-term problem into a deep financial mess.” The Union Bulletin:  Putting federal regulations on payday lenders has merit (June 3, 2016)

136. “Low-income workers often need small, short-term loans to help them meet their expenses pending their next paycheck. But the economic model for the “payday loan” industry is rigged against them, depending on their inability to pay the loan on time and repeatedly borrow.” The Times Tribune: Rules protect consumers (June 3, 2016)

137. “Naturally, payday loan businesses, which typically require only a checking account and a pay stub, are easy to turn to in those situations. But for many, the high-interest payday loans turn into a debt trap, forcing people to take out one loan after the other to pay off the earlier loan, its interest and meet other expenses.” The Herald: Tougher rules needed on payday loans (June 3, 2016)

138. The industry cynically pitches itself as salvation to the population it abuses. These are meant to be short-term loans, but with exorbitant fees. A customer who borrows $500 would generally be expected to repay it within two weeks and at an additional cost of $75, equal to an annual interest rate of 391 percent. But the clients of these shady operations are poor to begin with and often cannot make the repayment. They borrow more and before long can owe more in interest than the original loan amount. Some of them are even encouraged to borrow more as the solution to their problem. The Buffalo News: Payday loan firms swindle the poor and are a deserving target of new rules  (June 4, 2016)

139. In another telling win for consumer rights, the Obama administration is cracking down on high-interest payday loans, a financial practice that preys on low-income people barely scraping by. The move should bring relief from abusive tactics that hit the poor hardest. The San Francisco Chronicle: Sweeping changes should reform abusive payday loans (June 4, 2016)

140. The set of regulations, which will be open for public comment for several months, wasn’t as tough as some consumer advocates had hoped, but they will offer considerably more protections than exist now in a majority of the nation. Understandably, the payday lending industry is opposed to the proposals, contending that they will drive many payday lenders out of business and eliminate a safety valve for people who need short-term cash that they can’t borrow elsewhere. But an objective look at how this industry works suggests that in far too many cases it is not doing the consumer any favors. It’s a business model that finds its most success when its customers fail. The proposed regulations are a big step in the right direction. The Herald-Dispatch: Restrictions on payday lenders long overdue (June 5, 2016)

141. An unfortunate soul in a tight spot might have to get a $500 loan for two weeks to pay an unexpected bill. But then two weeks later he might have to pay off that loan and take out another to pay the rent. Then two weeks later pay off the second loan and take out a third to pay the car note. It’s a downward spiral. And when you add up all those weeks he’s had to re-do the loan, the yearly interest rate could add up to hundreds of percents. Arkansas Democrat Gazette: The Arkansas Way (June 5, 2016)

142. The payday industry is complaining. No surprise there. But tightening the reins on those lenders is necessary. This is predatory lending aimed at the working poor. The Toledo Blade: Tighten Payday Reins (June 7, 2016)

143. “In tandem, good local payday lending regulations and the proposed federal rules will greatly assist those in desperate financial straits from becoming hostages of unscrupulous payday lenders,” Olson said. Indeed. Forth Worth Star-Telegram: Bishop’s plea pushes city on predatory lending (June 10, 2016)

144. “The big money comes from rolling over an initial two-week or one-month loan into yet another loan – and another and another. One typical $500 loan after another is written, with interest and financing charges of as much as $75 each. Entrapped borrowers find themselves another two weeks older and deeper in debt, to paraphrase the old folk song about the hardships faced by a Kentucky coal miner.” Youngstown Vindicator: “Federal regs are needed to rein in payday lenders” (June 11, 2016)

145. “The payday industry is complaining. No surprise there. But tightening the reins on those lenders is necessary. This is predatory lending aimed at the working poor.” Pittsburgh Post-Gazette: Payday loan perfidy: Crack down on the lending schemes that fleece  (June 13, 2016)

146. “Drive around ZIP code 77022 on the city’s north side and one gets a clear picture of the strategy used by payday and auto title lending stores. Conspicuous in appearance and offering promises of a friendly experience, the stores are an irresistible snare for those desperately looking for a way to pay bills. ZIP code 77022, according to the American Community Survey, is among the more impoverished ZIP codes in Houston, with an average household income of $39,658.” Houston Chronicle: Congress should support federal consumer agency rules that rein in predatory loans. (June 15, 2016)

147. “Yet states that already outlaw these types of high-interest, short-term loans, including Pennsylvania and New Jersey, have reason to suspect that the rewriting of regulations could open a backdoor to a similar kind of borrowing — the kind that targets cash-strapped people who often are unable to repay the loans. Note to the feds: Don’t do us any favors.” The Express Times: Don’t open the door to payday loans in Pa.  (June 16, 2016)

148. But you know what else? According to the government, seven out of 10 payday loan borrowers are back within a month, taking out another payday loan, again paying 400 percent annualized interest. And two out of 10 new borrowers wind up taking 10 or more loans, one after another, piling fees and interest on top of the original debt, not to mention bank charges when online lenders repeatedly try to debit payments from customers’ accounts.  This can quickly become a financial hole from which there is no escape. Telegraph Herald: Our opinion: How to answer the $400 question?  (June 29, 2016)

149. All of this rates as a substantial improvement. At the same time, consumer advocates argue persuasively for more aggressive steps. For instance, the ability-to-pay criteria would take effect after a borrower had six payday loans. Put another way, too much damage already would be done. The standard must take effect from the start. The Beacon Journal: Be precise with payday lenders (July 1, 2016)

150. The rules portend a major shake-up to the payday loan industry, which frankly needs rattling. The earth already has started to move. Google recently banned ads for payday loans, saying it wanted to protect users from “deceptive or harmful financial products.” The heat is being felt in the political arena, too. U.S. Rep. Debbie Wasserman Schultz, D-Weston, was under heavy fire for taking money from payday lenders. She backed a bill in the House that would have blocked the Consumer Financial Protection Bureau’s new rules, but she reversed course and now supports them. The Consumer Financial Protection Bureau is on the right track with a framework of regulations that have the potential to make a real difference for consumers. With the political wind at their backs, regulators should make the rules as robust as possible in the interest of borrowers who can least afford to waste money.  The Tampa Bay Times: Stronger payday loan rules protect borrowers (July 1, 2016).

151. What Cheves found is that, despite repeated violations and written agreements to follow the law, many of Kentucky’s 517 payday lenders continued violating it. DFI typically has assessed the minimum $1,000 fine, even for repeat violators. Very few stores are shut but DFI did finally revoke the license of a Louisville shop that entered wrong numbers an astounding 353 times for only 12 customers in three years. Lexington Herald Leader: Trap lenders, not stressed Kentuckians (July 15, 2016).

152. A regulation that limits payday-loan amounts to what borrowers can afford to repay, given their existing obligations, will be doing everyone a favor, and we look forward to that becoming law. Las Vegas Sun: Short-term loans shouldn’t make finances even worse (July 18, 2016).

153. Low-income Floridians facing emergencies or unexpected shortfalls need to be able to borrow money quickly. But they also need rescuing from the payday loan industry that preys on their desperation. The Consumer Financial Protection Bureau has a solid framework on the table to begin reining in the industry’s worst practices. When finalized, the new rules should also bring needed competition so that vulnerable borrowers have options. Tampa Bay Times: More restrictions needed on payday loans (July 26, 2016)

154.  The payday lending industry preys on the economically fragile. Stiffer regulation of the industry is needed to protect the financially desperate who seek these services and often end up in a cycle of debt they cannot escape.  For years, Texas lawmakers have ignored the pleas for help from consumer advocates — forcing local communities to adopt their own rules and creating a patchwork of ordinances across the state. San Antonio Express-News: Rule change offers needed payday relief. (August 5, 2016).

 

 

 

 

 

 

How much did banks like Wells Fargo and US Bank make off of deposit advance loans?

profits

Last week, US Bank and Wells Fargo, two banks that have offered high-interest, short-term loans to their customers that closely resemble payday loans, announced they would no longer make the loans.

While advocates cheered the news because it means fewer people will be stuck in debt traps of trying to pay back these loans, it has been unclear until now just how profitable these loans are for the banks.

During a hearing held by the Senate Select Committee on Aging, this issue was raised by Senators.  (Hearing Focuses on Direct Deposit Advances, are they different than payday loans?)

Senator Bill Nelson (D-FL), the Chair of the Committee, highlighted the relatively low risk involved in making these loans when the customer’s income is from Social Security. Senator Nelson remarked, “As long as there’s a Social Security Administration, that money will be coming in.”

On Wednesday, the CEO of US Bancorp (parent company of US Bank) revealed just how profitable these loans have been.  The Wall Street Journal (U.S. Bancorp Profit Grows) reports that US Bank’s CEO commented that the bank earned $50 million a quarter from the loans.

Update: A July 28, 2014 article in the Cincinnati Business Courier cites the $30 million that Fifth Third Bank made from these loans in Q2, 2014  (Three reasons analyst says Fifth Third shares should jump)

While all of the banks that make these deposit advance loans have announced they will no longer make them (bowing to regulator and advocate pressure), there are several important pending issues:

1) How will customers who currently have these loans be treated?   One possibility would be to lower their interest rates to 36% APR, a reasonable (if expensive) rate already in place for our active-duty military, and to also extend the loan terms so that people can pay off the loan in smaller payments and rebuild their financial security.

2) Will the banks try to offer a replacement product?  Any new products could be an opportunity for banks to regain customers they are currently losing to storefront payday lenders, check-cashers, and online payday lenders.   If the banks were to provide safe, affordable, alternatives, it could also go a long way towards rebuilding trust with Americans.

If you’d like to learn more about bank payday loans, please visit these CRC resources:

1) Congressional testimony: In July 2013, Annette Smith testified to the Senate Select Committee about her experience paying almost $3,000 in fees as she renewed a $500 Wells Fargo loan over the course of five years.

2) US Bank CRA exam: In June 2013, CRC authored a letter to Office of the Comptroller of the Currency during US Bank’s most recent CRA exam, citing concerns with the bank’s “Checking Account Advance.”

3) Research on Payday loans: A June 2013 report by CRC and national partners in New York, North Carolina, and Illinois, focused on the dangers of payday loans (offered by banks and storefront lenders).

4) Comment on proposed rules: In May 2013, CRC and 62 members and allies sent a letter to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, providing input on proposed rules about consumer safeguards for these types of loans.

5) Wells Fargo Shareholder meeting: In April 2013, CRC and national partners traveled to Utah to attend Wells Fargo’s annual shareholder meeting, where Annette Smith, a Wells Fargo customer, told the CEO about her bad experience with the bank’s direct deposit advance loan.

6) Wells Fargo CRA Exam: In November 2012 CRC commented on Wells Fargo’s CRA exam, highlighting the direct deposit advance. Over 2,700 people contacted the OCC, calling on the bank regulator to give Wells Fargo a “failing grade” on its CRA exam.