Once again we’re seeing generalizations about payday lenders in one news story that came out earlier this week. Unlike companies that are licensed by the state, such as CFSA members, unlicensed and unregulated lenders, including those located offshore, are not subject to state examination, compliance standards, or the formal complaint process.

There’s no doubt that less access to legitimate, regulated loans will drive consumers to unscrupulous offshore providers that are in effect, beyond the legal reach of U.S. authorities. A proliferation of online pharmacies portends the future of short-term loans if consumers lack state-based, regulated credit options.

A 60 Minutes’ nine-month investigation called “The difficult fight against counterfeit drugs,” which aired March 10, 2011, detailed how counterfeit prescription drugs manufactured outside of the United States were sold through “rogue internet sites, often posing as legitimate pharmacies.” According to the report, “Thirty-six million Americans are estimated to have bought their medicines from these sites, many searching for quality drugs at a better price. Some sites pretend to be from Canada because Canada is known for safe, inexpensive medicines.”

CFSA believes that appropriate state regulations provide strong protections for consumers, while ensuring continued access to choices for short-term credit needs. That same principle should apply in cyberspace. Customers who choose to get a payday advance online should not forfeit any of the protections they would receive from a regulated, store-front lender.

According to this article, payday loans (a viable credit option that’s being used by millions of working Americans in 19 million households) “‘stink up’ the lending landscape”. And what option are they promoting? None other than the credit unions’ alternative. Like we said before:

Last September, the NCUA voted to allow credit union members to raise the annual interest rate for short-term loans to 28 percent. What the NCUA doesn’t discuss is that the fees credit unions tack on to a loan, drive the true cost up to, yes, triple-digits. For example, a two-week (typical payday loan) $400 loan at Kinecta Federal Credit Union costs $42.25, that’s an annual percentage rate (APR) of 275 percent. Or when considering a two-week loan at Mountain America Federal Credit Union, this short-term alternative has an APR at 876 percent.

Like it or not, short-term, unsecured credit is expensive and no one, including banks and credit unions can afford to make loans at the rates of traditional, secured loans. Is the cost worth it to consumers? We think that payday lenders, banks, and credit unions should clearly disclose loan fees and terms and at the end of the day, only the consumer can decide whether the loan is appropriate for their needs.”

Our Board Chair D. Lynn DeVault goes on to say:

“Like it or not, short-term, unsecured credit is expensive and no one, including banks and credit unions can afford to make loans at the rates of traditional, secured loans. Is the cost worth it to consumers? We think that payday lenders, banks, and credit unions should clearly disclose loan fees and terms and at the end of the day, only the consumer can decide whether the loan is appropriate for their needs.”

CFPB is at a “virtual halt” and the GOP are close to calling it a victory, or so says this Washington Post article.

The stalemate has lasted so long that it would be virtually impossible for the Senate to vet any candidate before the agency opens for business July 21, even if a compromise could be reached. The White House could make a recess appointment during the Independence Day holiday, but Republicans have promised to keep the Senate in session. The CFPB has said it will be ready to start work on the launch date, even if it has no leader and sharply curtailed authority.

One tiny little inaccuracy in the article that we wanted to clarify:

The industry also chafed at the prospect of payday lenders, check-cashers and other financial firms flying under the radar of the new agency unless a director is named, while banks will still be subject to the CFPB under existing regulations.

Not all payday lenders are unregulated. Since the 1990s, states have steadily gained expertise in regulating the payday advance industry. That knowledge has led to broad discretionary power for state regulators to impose new licensing requirements, interpret or enforce existing regulatory requirements in different ways, and issue new administrative rules.

CFSA members are regulated by state law.  State regulations are meant to ensure that the payday advance remains a responsible, small dollar, short-term loan product.

Yesterday a reporter from The Street said that the CFPB’s complaint system would be getting intake once the new consumer agency was up and running come July 21. And also said:

This includes credit cards, check-cashing services and “pay day loans.” The bureau is already receiving complaints but is directing them to other government agencies.

The only problem is, Elizabeth Warren has sworn testimony before Congress in late May saying that the complaint process “will start with credit cards” (check out the testimony at 50:45).  Warren says they are using credit cards as a model for other financial products and that they’re “trying to get this product right”.  But there’s no mention that the Bureau would intake complaints from other financial products. She even tells Gowdy that they not received any complaints yet.

Just sayin’.

We saw another article (from The Motley Fool) come through touting FINRA’s “recent” study that was conducted in 2009 (two years after the Talent Amendment went into law—a bill that made traditional payday lending to military personnel and families virtually non-existent).

The stat: Nearly one in three enlisted personnel or junior NCOs had used payday loans, auto-title loans, or other risky borrowing practices in the previous five years.

The reality: First and foremost, CFSA member companies do not market or provide two-week payday advance loans to the military.

Military personnel today rely on automobile title loans, installment loans, and online military loans for short-term credit needs. Unfortunately, reporters and public officials don’t make the necessary distinction among lenders and categorize all short-term loans to military personnel as “payday loans” which they are not.

The Defense Reauthorization Act of 2006 imposed a 36 percent rate cap on all loans to the military of less than 90 days. Lenders that provide loans that exceed 90 days are free to charge higher interest rates and they do. For example, Pioneer Services, a division of MidCountry Bank makes loans to the military for debt consolidation, automobiles, bad credit, and personal needs at interest rates and fees that add up to triple-digit APRs.

More coverage of Warren’s speech:

“The lesson seems clear: Rules should be focused, and those that are not useful should be revised or eliminated,” she said, adding that the bureau would not primarily focus on writing new regulations. Ms. Warren said she even agreed with the chamber’s recent proclamation that the bureau should work to “prevent duplicative and inconsistent regulation of Main Street business.”

The Hill newspaper has the recap:

Elizabeth Warren, the architect of the new Consumer Financial Protection Bureau (CFPB), mounted a spirited defense Wednesday for keeping the agency’s budget free of the Congressional appropriations process.

House Republicans are backing legislation that would bring the CFPB’s funding within Congress’s control, but Warren said in a speech to the US Chamber of Commerce that there is no “principled reason” for doing so.

“Not one other banking regulator — not one — is subject to appropriations,” she said at a capital markets summit hosted by the chamber. “Requiring the CFPB to go into every examination against a trillion-dollar company knowing that the company could turn its lobbying force against the agency’s funding is not a prescription for fair and evenhanded enforcement.”

Merlys Harris at MoneyWatch.com says this in a piece about overdraft protection:

A payday lender charges less, on average about $17.75 per $100, according to Moebs. But to get a payday loan, you have to show proof that you are an earner and that you have a bank account, and the approval process takes a few days.

The payday loan process takes 15 minutes, not “a few days.”  In all other respects, it’s a pretty fine piece.

Just came up on their website:

As Christmas loomed, Puente needed to make payroll for her handful of employees. Her bank cut her credit card limit, and refused to extend her a loan. So she went to Advance America to get a payday loan.

Middle-income Americans like Puente are increasingly turning to alternative loans to make ends meet. Thanks to Dodd-Frank and other regulations, bankers say they can’t make a profit on lending to this group.

From the Iowa Independent:

“People who go to payday loans, their main problem is that they had no bank to go to,” Miller said. “I’m in favor of getting people banked so that they don’t have to go to the payday loan people. I want people to know their rights, and what the best way to (finance) is and a payday loan isn’t it.”

Do I need to point out the mistakes in thos two sentences?