Continued coverage from the WoonSocketPatch.com.

According to the article:

CRL estimates that $3 million per year is being sucked out of the Rhode Island economy by nationally run payday loan companies, such as Check ‘N Go of Ohio and Advance America of S.C.

IHS Global Insight conducted a comprehensive study analyzing the economic impact of the payday loan industry nationally and in states with storefront locations. Findings illustrate “measurable and significant” economic benefits to local economies directly through employment, compensation and taxes, as well as through indirect and induced relationships with suppliers and other industries.

SOME KEY FINDINGS:

The industry contributed over $5 million to Rhode Island’s gross state product (GSP) in 2007.

The payday lending industry supports 74 jobs1 in Rhode Island, including 42 people directly employed in13 storefront locations.

• The industry indirectly created another 10 jobs in supplier industries.
• Payday loan store and supplier industry employees induced the creation of 23 jobs through the purchase of goods and services using earned wages.

In Rhode Island, the total labor income impact from the payday loan industry is nearly $3.2 million:

• Through direct employment, payday loan stores contributed $1.7 million in labor income.
• Suppliers to the payday lending industry contributed $480,000 in labor income as an indirect result of the revenues generated by the payday loan industry.
• $1 million was generated from the wages of payday loan store employees and supplier industries’ employees as they were spent in Rhode Island’s economy.

A bill moving through Rhode Island could restrict access to credit for consumers in the state.

Part 1 of a story coming from the WoonSocketPatch.com:

A House bill (H5562) sponsored by Rep. Frank Ferri (D-Warwick) would repeal payday lenders’ special exemption, cap payday loans at a 36 percent annual interest rate …

Evidence shows that states that have seen restrictions, such as interest rate caps, access to short-term credit has all but vanished. Such a prohibition would drive licensed and regulated entities like CFSA members out of the marketplace and drive consumers to higher cost providers, many of which are unregulated and unlicensed.

The best way to protect consumers is to ensure that they understand the actual cost of the loan. And when you take a look at the other short-term products out there, consumers can make an informed decision for themselves. A payday advance compares favorably to many consumer alternatives, even when expressed as an APR for two-week terms:

• $100 payday advance with a $15 fee = 391 percent APR
• $100 bounced check with a $28 overdraft protection fee = 730 percent APR
• $100 credit card balance with a $35 late fee = 913 percent APR
• $100 bounced check with $60.47 Non-sufficient funds and merchant fees = 1,577 percent APR
• $100 utility bill with $46.16 late/reconnect fees = 1,203 percent APR

A natural progression in the life cycle of a financial product, should a borrower not commit to their obligation, is the collections/loss mitigation arena (where debt collectors reside). Some new stats have just come in on the industry. According to the Federal Trade Commission: the debt collectors received 140,036 complaints in 2010. That’s up 17 percent from 2009.

Bankers are hoping to make lemonade after getting served a bunch of lemons with the fight over interchange fees. How are they going to do this? By convincing the Federal Reserve Board to raise its proposed 12-cent cap.

Following quotes attributed to an American Banker article that came out today (subscription required):

“My understanding is that they have taken the comments very seriously in terms of reassigning the numbers and I think the expectation, even though they haven’t formally said it, is that the number is going to be higher than 12 cents,” said Gil Schwartz, a partner at Schwartz & Ballen LLP and a former lawyer for the central bank.

What remains unclear is exactly how high it will go, or what other substantive changes the Fed could make.

“We are expecting some changes, but exactly what they will be and how far they will go; we do not know,” said Karen Thomas, senior executive vice president of government relations and public policy for the Independent Community Bankers of America.

US Bancorp’s chairman and CEO says banks shouldn’t “overreact” to the creation of the CFPB, or worry about its effect on business.

“It is just simply timely and topical because it’s new and we haven’t had it before,” Richard K. Davis said yesterday at a conference of the Consumer Bankers Association in Orlando, Florida. “But don’t think it’s going to be that harmful.”

He also went on to say re: the CFPB director nomination:

“I think we probably ought to embrace it and move forward and work with whomever is in that position.”

With last weeks news that the movement in the Senate to delay a new cap on debit card swipe fees had been shot down, many banks immediately turned their attention to how to make up for all of the lost revenue that the lower fees will cause. So far, they seem to be finding answers. Banks have already begun considering increased ATM fees, downgrading rewards benefits, and charging customers for opening up checking accounts. We know that the banks will be losing an estimated $14 million as a result of the new debit card rules, but we don’t know how they’ll make it up.

“Banks have two ways they can cope; they can cut costs or they can raise revenue,” says Bart Narter, a banking analyst with the consulting firm Celent. “They’re going to have to charge you for things that they used to give away, like online bill pay.”

ACA International, The Association of Credit and Collections Professionals, proudly introduces “The Path Forward: A Blueprint for Modernizing America’s Debt Collection System.” Their Web site announcement says:

The explosive growth in the use of cell phones, the Internet, social media, e-mail and other new technologies has changed how people communicate. ACA’s Blueprint for Modernizing Debt Collection outlines substantive public policy proposals to remove unnecessary impediments to effective, straightforward communications between consumers and debt collectors.

The Blueprint consists of five points and a commitment from ACA to help members prevent, reduce and resolve consumer complaints:

• Better, Simplified Communications with Consumers: Allow consumers and collectors to better and more effectively communicate about debts.

• Advocate for Responsible Litigation in the Collection Industry: Ensure equal access to the judicial system for all classes of litigants and hold those litigants acting in bad faith accountable for their actions.

• Assure Proper Debt Documentation: Improve the flow of information by clarifying the specific debt information that must be maintained by creditors and asset buyers in order to allow debt collectors to provide documentation responsive to a consumer’s dispute regarding the amount of the debt, to whom the debt is owed or who is responsible for paying the debt.

• Adopt a Federal Seven-year Statute of Limitations for the use of Litigation to Collect Debts: Impose a seven-year Federal limitations period on the use of litigation to collect debt and prohibit filing or threatening to file suit on time-barred debts, while still allowing for the collection of the debt.

Want to read a highlight of the Blueprint? Click here.

Those were some of the words of wisdom offered by President Obama last week as he dropped in on the White House’s Personal Finance Online Summit. The event was held last Wednesday and consisted of 25 online personal finance journalists who were there to hear from high-ranking administration officials about personal finance issues and the role that the administration will play in addressing them. The impromptu visit from the President was certainly a highlight of the day. Beyond reflecting on his own experiences managing his personal finances, President Obama also discussed how these principles can apply to our government. He stressed the importance of saving and investing federal money just as individuals invest money from their own incomes.

In addition to Obama, Elizabeth Warren also appeared at the event, but as one of the scheduled speakers. In her speech to reporters, Warren emphasized the importance of maintaining open and competitive markets:

“Let’s try a competitive market,” she said. “Competitive markets work for consumers and for those who market products consumers want. They do not work for those whose business model is to fool people.”

Definitely doesn’t fall in line with CFSA’s guide to payday advances, but an interesting tidbit nonetheless. According to a recent study published in the May issue of the journal Social Science Research, the more debt incurred by those in the 18-27 age group, the higher their self-esteem and the more in control they felt.

“We thought educational debt might be seen as a positive because it is an investment in their future, while credit-card debt could be viewed more negatively,” Dwyer said. “Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt – it increased their self-esteem and sense of mastery.”

In our “Your Guide to Responsible Use of Payday Advances” (that we’re currently redesigning), we say:  “We believe that payday advances are designed for short-term use only. Like any advance or credit account, payday loans should always be used responsibly.”

Ohio’s biggest pawn shop operator, Cash America, is looking for some new rules in the state’s pawn shop regulation. In particular, the pawn and payday lending company is looking to increase the state cap on pawn loans from 5 percent a month to 20 percent. While critics have already spoken out against such an increased rate cap, some industry members look to the other aspects of the potential legislation to show the improvements that this bill would provide for the pawn industry.

Jason Paduchik, a lobbyist for Cash America, said the changes the company is seeking include things Ohioans should like. It would increase the amount of time a store has to hold an item before selling it so law enforcement has more time to spot stolen property. It also would let military members put pawn loans on hold while on active duty.