Colorado statement
August 12, 2010 | Colorado, research | Comments (0)Consumer Lending Groups Issue Statement on New Loan Law
Denver, CO – August 11, 2010 – A new law governing short-term consumer credit goes into effect today in Colorado. The law eliminates payday loans and, in their place, creates a six-month consumer installment loan product. The industry associations representing lenders that formerly offered payday loans in Colorado — the Colorado Financial Service Centers Association (COFiSCA) and the Community Financial Services Association (CFSA) — issued the following statement regarding the new law:
The new law that goes into effect today is the result of definitive action taken by the state legislature to eliminate payday loans in Colorado. HB 1351, passed with the urging of groups opposed to the payday lending industry, leaves over 300,000 consumers in Colorado without a convenient, highly-regulated credit product that has been available to them for more than a decade. Moreover, the new law has already exacerbated economic hardship in the state with the closing of dozens of payday loan stores and the loss of at least 100 full-time jobs with benefits.
Unfortunately, HB 1351 is yet another example of hasty, ill-conceived antibusiness regulation that limits consumer’s short-term credit options. The law allows lenders to offer consumers an installment loan of no more than $500 for at least a six month period, but eliminates consumers’ ability to take out a loan simply to bridge a cash shortfall until payday. In its present form the law offers consumers little but confusion and complexity, and offers lenders uncertainty in terms of a rational framework for implementation.
Our members have been working intently since HB 1351 was signed into law by Governor Ritter on May 25th to evaluate whether the loan product crafted by the legislature can be translated into a viable business model. We do not know if this installment loan will meet the needs of our customers, and we are concerned that its complex nature will negatively affect the simplicity and
transparency they had come to expect with the payday loan product previously offered. As an industry that serves over 300,000 Coloradans a year, there is no question that the need for short-term personal credit remains strong, perhaps now more than ever given the deteriorating economy across our state and country.
Over the upcoming months we hope to have a clearer understanding of customer response to the new product offering. We will continue working with state policy makers to refine the details of this new law in an effort to better meet the needs of consumers.
In the meantime, we will work to assure that the lenders who make up CFSA and COFiSCA operate in a fully compliant manner.
About the Colorado Financial Service Centers Association: COFiSCA is the state trade association representing payday lenders in Colorado. COFiSCA’s primary mission is to bring a broad range of community based financial services businesses together with the goal of identifying industry best practices, improving customer satisfaction and establishing guidelines to assist members in complying with various state and federal regulations. COFiSCA members are dedicated to delivering valuable community based financial services to underserved consumers throughout the State of Colorado. For more information: www.cofisca.org
About the Community Financial Services Association of America: CFSA is the only national organization dedicated solely to
promoting responsible regulation of the payday advance industry and consumer protections through CFSA’s Best Practices. As
such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers. For more information: www.cfsa.net
Now they hate PDL alternatives
June 8, 2010 | federal legislation, industry, research | Comments (0)National Consumer Law Center is now attacking payday loan alternatives as having the same costs as payday lenders. We’ve been saying it for years, however, our position is to let the consumers choose. Their position is to ban everything.
No way to help the poor
May 14, 2010 | federal legislation, industry, positive media coverage, research | Comments (0)Frum’s Forum discusses financial reform and payday lending. From the post:
These {payday lending} bans have not improved the lives of low-income individuals. The Federal Reserve Bank of New York compared the finances of households in Georgia and North Carolina with the rest of the country. They find that there was no improvement, and that personal finances were actually worse off, “Our findings will come as no surprise to observers who have noticed that payday credit, as expensive as it is, is still cheaper than a close substitute: bounced check ‘protection’ sold by credit unions and banks …the protection can be quite expensive.”
Credit Unions can’t compete
May 10, 2010 | alternatives, industry, positive media coverage, research | Comments (0)From a new study from the University of California-Davis:
Prof. Stango compared credit union short-term loans to payday loans in terms of both fees and convenience. His research — compiled from data from credit unions, the National Credit Union Administration and payday loan customer surveys — found that credit union rates are generally equal to or higher than those of traditional payday lenders, particularly on a risk-adjusted basis, and that the loans are less convenient for borrowers.
Nor, Prof. Stango noted, do credit unions compete effectively with payday lenders on non-price terms, such as hours of operation or protection against damage to a borrower’s credit score from default.
The fatal flaws of the bill
April 22, 2010 | federal legislation, industry, research | Comments (0)From the Heritage Foundation:
Limits financial choices of American consumers. The bill contains a new “Bureau of Consumer Financial Protection” with broad powers to limit what financial products and services can be offered to consumers. The intended purpose is to protect consumers from unfair practices. But the effect would be to reduce available choices, even in cases where a consumer fully understands and accepts the costs and risks. For many consumers, this will make credit more expensive and harder to get.
The end of cheap credit
April 11, 2010 | alternatives, personal finance, research | Comments (0)From the New York Times:
Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.
Polls are irrelevant
April 9, 2010 | federal legislation, industry, research | Comments (0)On an issue as complicated as financial reform, how you ask the questions can skew poll results. Nevertheless, pollsters keep polling. From The Hill:
Consumer protection
The polling is mixed on new consumer financial protections. Some analysts argue there is strong support for a new federal agency over products like home loans and credit cards, but the polls vary greatly in how they ask the question.Pew: 86 percent of respondents support giving consumers better information to make decisions on financial products.
Zogby: 59 percent of those polled said a separate Consumer Financial Protection Agency is neededYouGov: Only 12 percent of those polled said the goal of financial reform should be creating a new agency with rules about how banks treat customers.
Must read!
April 8, 2010 | industry, research | Comments (0)A new study by the Hispanic Institute, “Thinking Outside the Bank.” Link can be found here. Some highlights:
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Using the term ―predatory‖ for an industry that serves working class families makes no more sense than saying that stores located in malls prey on suburban families.
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Calling fees excessive is also a subjective term, because in our view, there is also no accepted demarcation line of where a fee starts or stops being excessive. It can generally be understood that ―excessive‖ is a relative term. In economic terms, this is the opportunity cost, ―the value of the next-highest-valued alternative use of that resource.
- Consumers make rational decisions based on their circumstances and within the context of their environment, ―street smarts
Wait, I thought industry was booming
April 6, 2010 | customers, industry, research | Comments (1)From the article:
The payday loan industry is seeing a steady decline in the number of borrowers as a result of high unemployment rates, reports Phoenix lender, 1-Stop Check Cashing. Families are instead turning to car title loans for quick funds.
The payday lending sector experienced a surge when families crippled by the economic recession found it more difficult to make mortgage, car, and debt payments in addition to paying for their basic daily needs. The rise in unemployment rates in Phoenix has made eligibility for payday loans decline, leaving many families for search for alternative loan methods to keep up with their bills.
The media can’t get its story straight. We’re booming, we’re declining, blah, blah, blah.
Priorities
March 30, 2010 | alternatives, federal legislation, industry, research | Comments (0)So what do the American people want Congress to focus on? From the latest Pew Research:
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