The CFPB is at the campus of Hunter College in New York City, where Richard Cordray, Raj Date, industry insiders, and consumer advocates are discussing customer experiences with checking accounts and overdraft protection.

You can either watch it by going to the CFPB’s website, by clicking here. Or watch it below:

 


Live video for mobile from Ustream

Very great example of how innovation can happen in the short-term credit market, and a look at the many alternatives that are available to all consumers who seek payday-like loans. We applaud those in the space who disclose fees and APR upfront (a Best Practice of CFSA Members is “Full Disclosure,” click here to find out more). Only consumers win when this is done, allowing them to easily comparison shop.

BillFloat and ZestCash are two online start-ups who “are introducing new versions of these loans that also carry significant fees,” and we’re happy to see that consumers have many options when shopping for a short-term credit loan.

In this New York Times article, Ann Carrns highlights the following about these two companies who are offering innovative products in this space:

“BillFloat, based in San Francisco, doesn’t pay any money directly to the customer. Rather, it pays its customers’ bills — say, a utility bill or cellphone bill — and then automatically deducts the amount of the bill, plus fees and interest, from the customer’s bank account within 30 days.”

…

“Customers apply by filling out an online questionnaire, and are then contacted by a ZestCash representative to complete the process. ZestCash, Mr. Merrill said, uses a proprietary underwriting process that looks at hundreds of variables to determine if the customer is likely to pay back the loan. If approved, the customer chooses an amount to borrow — up to $800 — and selects not only the length of the loan, but also the amount of the payments. The payments are automatically withdrawn from the customer’s account when a paycheck is deposited. The approach gives borrowers more flexibility…”

This is one of our critics’ main arguments against our industry, and last week, research was released that shows evidence that payday lenders do not target minorities. Donald P. Morgan and Kevin J. Pan with the Federal Reserve Bank of New York says that when it comes to research showing that payday lenders target minorities:

“Several studies have found that payday lenders are indeed more likely to locate in neighborhoods with disproportionately large Hispanic and/or black populations. Importantly, however, this literature uses data at the county or Zip code tabulation area, so the authors can’t really say which households are actually using payday credit. Nor can they control for household level income and other variables that might influence payday credit usage. The household-level data we study allows us to do both.”

Another important piece to NY Fed’s research: Unconditional Comparisons

“…Unconditionally, payday credit users and nonusers differed in a number of ways. The average payday credit user was younger for one, by about 11 years. Users were disproportionately female: 41 percent of users were female, while just 27 percent of nonusers were female. Single households, particularly single households headed by women, were disproportionate users of payday credit.

“There are obvious racial differences between users and nonusers as well, at least unconditionally. Consistent with the targeting critique, blacks and Hispanics were disproportionately represented among payday credit users. Blacks represented 22 percent of users, but only 12 percent of nonusers. Hispanics accounted for 15 percent of users, but just 9 percent of nonusers. By contrast, whites represented a larger share of the nonusers.

“There are some educational differences as well. Perhaps surprisingly, payday credit users are not the least educated members in society; users were actually more likely to have a high school degree or to have a GED than were nonusers. However, they were less likely than nonusers to have completed college.”

CFPB Director Richard Cordray speaks on payday loans at yesterday’s field hearing in Birmingham, Alabama.

CFSA released the following statement today regarding the Bureau’s field hearing yesterday in Birmingham, Alabama. The following comments can be attributed to D. Lynn DeVault, CFSA’s Board Chair:

“We appreciate the Consumer Financial Protection Bureau’s (CFPB) willingness to hear from all stakeholders as it develops plans to regulate the small loan market. Storefront lenders made 110 million loans to nearly 20 million American families last year. At a time when access to small dollar loans is more vital than ever, developing strong, uniform, research-based rules will be a benefit to consumers.

“State governments currently regulate all aspects of payday advance lending in every state where payday advance loans are available. We have long worked with our state regulators in all 32 states where we operate to ensure compliance with state licensing and renewal requirements, supervision and examination procedures, and other consumer protection laws and regulations. Our member companies are committed to following all state and federal laws, as well as adhering to our association’s strict set of Best Practices that include truthful advertising, appropriate collection practices, and providing an Extended Payment Plan to customers who are unable to repay their payday advance loan.

“The Bureau’s new Short-Term, Small-Dollar Lending Examination Procedures is now published and our members look forward to working with our new federal regulator to confirm their compliance with all federal consumer financial laws and regulations.”

Quote of the day (from yesterday’s hearing) came from none other than Ted Saunders, member of CFSA’s Board of Directors and also CEO of Community Choice Financial:

“My customer is not uninformed, my customer is not unintelligent and I respectfully disagree that closing me down and letting alternatives flourish would be a good solution”

CFPB Director Richard Cordray’s remarks from yesterday’s field hearing have now been posted onto the #CFPB website. Click here to access the transcript.

A few highlights:

• “… Let me stress again that this is a field hearing. We came here to listen, to learn, and to gather information on the ground that will help inform our approach to these issues. We are thinking hard about these issues, and we do not have all the answers worked out by any means.”
• “Whatever their reasons may be for taking out a payday loan, Americans are now borrowing billions of dollars this way. Lenders collect over $7 billion in fees annually.”
• “… And so I want to be clear about one thing: We recognize the need for emergency credit. At the same time, it is important that these products actually help consumers, rather than harm them.”
• “In addition to the things we need to learn more about, we know there are some payday lenders engaged in practices that present immediate risk to consumers and are clearly illegal. While we need to learn more about the prevalence of this conduct and what allows it to fester, where we find these practices we will take immediate steps to eliminate them.”

Ask, and you shall receive. With so many satisfied payday lending customers and employees asking for a forum to provide comments, the Bureau put up a comment section where you can now go to make comments and “Tell Your Story”.

The CFPB wants you to tell them your story: good or bad, about your experience with a payday advance. Your story will help inform how the CFPB works to protect consumers and create a fairer marketplace. By filling out their comments section or even telling your story via their contact form, you are opting in to tell the Bureau why a payday advance is an important financial option for you!