Armstrong Williams in our corner
September 27, 2010 | positive media coverage | Comments (1)He understands free markets. From his column today in The Washington Times:
It may surprise you that these non-bank financial service providers include pawnshops, payday lenders and short-term lenders. They also provide invaluable products such as reloadable debit cards and installment loans. Yet most people’s knee-jerk reaction when they hear the words “payday lender” is to accuse these businesses of predatory lending practices because of the “excessively” high interest rates.
But are they really excessive? One of the most fundamental financial principles states that the greater the risk, the greater the return. In other words, these lenders need to charge interest rates that compensate them for giving money to high-risk consumers — those who have histories of abysmal financial management, not paying their bills or leaving others holding the bag. The default rates are, in fact, excessively high for these businesses.
Should payday loans be outlawed?
August 30, 2010 | positive media coverage | Comments (1)A California state senator answers the question emphatically in a Washington Informer guest piece:
Traditional banks are allowed to hold government deposits where they pay minimal interest rates and make a sizeable profit. And as we have seen if the traditional bank makes a bad decision the government bails them out. So if those concerned offer no solutions, don’t close the door on the last hope for those locked out. While the poor and credit-challenged appreciate your sympathy, if you can’t help, don’t hurt.
Financial reform a fiasco?
July 1, 2010 | federal legislation, industry, positive media coverage | Comments (0)This Stanford economics professor thinks so. From his Wall Street Journal piece:
Another false remedy is a new Bureau of Consumer Financial Protection housed at, and financed by, the Fed. The new bureau will write rules for every type of financial service, most of which (such as payday loans) have no conceivable connection with the crisis. Yet another false remedy is a new Office of Financial Research at the Treasury that will look into systemic risk. The unrealistic hope here is that it will somehow do a better job than the Fed, which already had that responsibility leading up to the crisis.
“The bill also has the wrong focus…”
June 30, 2010 | federal legislation, industry, positive media coverage | Comments (0)From Rep. Jeb Hensarling’s piece in USA today:
The bill also has the wrong focus, attacking gift cards and payday lenders while refusing to consider any reform of Fannie Mae and Freddie Mac. The two failed mortgage giants have already cost the American people $147 billion, yet Democrats disappointingly claim they are “too complicated” to address here.
Additionally, at a time when unemployment is hovering near 10%, this bill does nothing to create the jobs our economy desperately needs. Instead, it makes credit — especially small-business credit — less available and more expensive by creating a new federal loan czar with the power to ban and ration consumer credit products.
Not part of the problem
June 25, 2010 | Alabama, industry, positive media coverage | Comments (0)CFSA’s Tommy Moore responds to a recent anti-payday lending piece in the Montgomery Advertiser:
While the 36 percent APR sounds reasonable, at such a rate the total fee charged on a $100 two-week advance would be $1.38. Payday lenders would not be able to cover the cost of originating a loan, let alone meeting employee payroll and benefits.
A proof point of this is that Goodwill, a non-profit, tax-exempt charity, is charging customers $9.90 per $100 borrowed (252 percent APR) for their “Good Money” payday loans. And this is only to break even.
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.
Financial reform Goldman can love
May 7, 2010 | federal legislation, industry, positive media coverage | Comments (0)From Kimberly Strassel in the Wall Street Journal:
The bill does include endless pages of costly regulations, but heavily regulated banks employ entire departments to navigate rules. Yes, the new regs will shave off profits, but the real burden—including that of the infamous new Consumer Financial Protection Agency—will fall on their smaller credit competitors, who didn’t cause the crisis and don’t have the financial cushion to absorb these costs. Anyway, if the regulations are too onerous, the big players can shift more business overseas. It’s always big business that is best able to deal with big government.
Why does CRL want to silence consumers?
May 3, 2010 | federal legislation, industry, positive media coverage | Comments (0)From the executive director of the Consumer Rights Coalition in The Hill:
As a former payday loan customer, I believe we should all have the right to make our own financial decisions. Our members deserve — just as much as CRL — to take part in the debate about the financial options available to them. Good public policy comes from real, honest debate. Let the consumers speak for themselves. Why does CRL want to silence them?
Who’s writing consumer protection legislation?
April 23, 2010 | federal legislation, industry, positive media coverage | Comments (0)According to this article, it’s Eric Stein, the Treasury official who used to run the Center for Responsible Lending:
An Obama Treasury department official behind the consumer protection language in the proposed financial reform legislation is a former head of the Center for Responsible Lending (CRL), the advocacy wing of a non-profit community development lender funded by none other than John Paulson — the billionaire who worked with Goldman Sachs to package bad mortgages into securities and offer them on the market.
President Obama’s deputy assistant secretary for consumer protection Eric Stein served as senior vice president of CRL. He also served as the President/SEO of CRL’s parent network, the Center for Community Self-Help.
