From March:

ACORN & Center for Responsible Lending:  Subprime Culprits

For those of you who don’t know, ACORN is a consumer group that began after the Community Reinvestment Act (CRA) became official in 1977. Their stated goal since the beginning has been to combat redlining. However, what they have achieved over the years is to effectively convince lenders to relax their standards so that they can serve people with poor credit and little or no assets. According to the Wall Street Journal, ACORN and the CRA “laid the foundation for the house of cards built out of subprime loans.”

During the recent presidential election, an organization called the Association of Community Organizers for Reform Now (ACORN) grabbed more than its share of the headlines. Specifically, there have been allegations that ACORN has been involved in large-scale voter fraud (and here’s a road map).  But let’s focus on some of their even more prominent activities, and how they have had close ties with Self-Help Credit Union and the Center For Responsible Lending (CRL). It could easily be said that ACORN and the CRL have sided against the American taxpayer since day one.

Do journalists think it’s clever to say “loan shark”?

Love the name of this company, “Loan Shack.”

A pawn shop in Nevada opposes competition.

From today’s Washington Post editorial:

Nothing in current law or regulations prevents banks from doing this, which is why banks’ revenue from overdraft fees is projected to climb from $18 billion a decade ago to $38.5 billion this year. No doubt our nation’s troubled financial firms need all the cash they can get these days just to remain on sound footing. No doubt many consumers who received automatic overdraft protection were indeed glad that they got it, as the American Bankers Association argues. And, yes, in an ideal world, consumers would be responsible for precisely monitoring their personal cash flows.

Need I say it.  Payday loans are the most transparent financial service there is.

From today’s USA Today:

Long after the economy recovers, millions of Americans will be left with a grim legacy of the recession: damaged credit scores, the three-digit ratings that help determine consumers’ ability to get loans and other types of credit.

Even though some consumers have seen their credit scores improve as they trim their debt, others have seen their scores drop significantly because of late payments on bills, foreclosures and rising credit card debt.

Meanwhile, lenders’ actions during the recession are delivering another blow to borrowers — even some with pristine credit. Lenders are closing credit card accounts and lowering credit limits for millions of consumers and business owners who have never paid late. Some lenders are reporting mortgage modifications in a way that dings consumers’ scores, dealing a setback to those trying to get their finances on track.

PDLindustryblog has post about the hearing in Ohio this week.  There’s also a hearing on the Consumer Financial Protection Agency in the House this week.  I’ll keep you updated on both.

Ted Saunders, CEO of Checksmart, has a letter today in the Canton (OH) Repository:

During last year’s General Assembly session, lawmakers urged payday loan providers to alter their services. Many lenders have done so and now offer loans under the Small Loan Act and the Mortgage Loan Act at lower rates.

A large number of financial institutions, including consumer finance companies, automobile financiers and some retail companies, have used them for lending programs for years. Rep. Matt Lundy’s bill would shut down companies that previously offered payday loans, even though they are serving a distinct need and operating legally and in full compliance with all state regulations. Consumers are best served when they have access to a variety of credit options. Customers tell us that they appreciate our service — and the flexibility it allows them to manage financial challenges.

When people run out of choices, they are forced to turn to more expensive alternatives, including the costs associated with bounced checks, missed credit card payments, utility reconnection fees or unregulated offshore Internet loans.

As an analyst covering the bank industry, the interesting thing to me is that payday lenders are routinely vilified while bankers are often regarded as pillars of the community, despite the fact that standard bank overdraft practices are far less consumer-friendly than payday loans. The debate over payday lending is relevant because bank overdraft charges effectively form the umbrella under which payday lenders can function. Far more than banks care to admit, overdrafts and payday loans are substitute products. In fact, the biggest difference is that payday lenders offer consumers a better deal than banks do. The typical payday loan costs a fee equal to 15% of the amount borrowed for a two-week loan, which equates to an APR of 391%. Borrowers must actively seek out payday loans, and the terms and conditions are all laid out immediately prior to the transaction. In contrast, the effective APR on a typical overdraft transaction can exceed 1000% (it varies by type of transaction – check/ATM/debit) and disclosure, while excellent at some institutions, is broadly far inferior to that of the payday loan industry.

ACORN chief is a tad reluctant to testify before Congress.