Replace payday loans with… community funded emergency credit pools?
July 21, 2008 | New Hampshire, alternatives | Comments (0)In yesterday’s Concord Monitor, a Mr. Paul Stillwell put forth his idea for a plan to replace payday lenders in New Hampshire. The Payday Pundit doesn’t agree with his point of view (calling payday lenders “parasitic” is a bit over the top), but at least Mr. Stillwell has a suggestion that doesn’t involve borrowing money from friends and family.
[We could] create a community-owned pool of money to be used expressly for emergency credit. A lender commits money into a community owned CD for a period of years with a higher-than-average rate of return, say 6 percent. Once the pool has grown to a sufficient size a partner organization, whether a credit union or local bank or other nonprofit offers emergency credit lines at a decent rate of 16 percent or so [for six month or one year terms].
So this plan would rely on banks and credit unions to administer the loan origination (which would likely lead to fees passed onto consumers or the community), and it would require the cooperation of many “investors” in the community to get the emergency pool up and running. Not really a short-term fix. This plan could very well be a competitive answer to payday lending, but politicians in New Hampshire chose strong-arm tactics instead of free-market philosophy to regulate the industry.
New Hampshire officials indifferent about state’s job losses
July 21, 2008 | New Hampshire | Comments (0)One government official had this to say about the inevitable closing of payday lenders across New Hampshire:
“(The industry spokesmen) say ’What are people going to do that don’t have access to these anymore?’ But we lived a long time in this country without access to these payday loans.”
Indeed we did. But that is, in no way, shape or form, a reason that justifies the elimination of these loans. Nor is it any solace to those who want the financial freedom to take out a short-term loan. This is more “fuzzy reasoning” from critics of payday loans.
The article in the Keene Sentinel also lays out the effects of the New Hampshire cap on a $100 loan:
The cap would translate to almost $3 on a 30-day $100 loan, and $1.38 on a two-week $100 loan — or about 10 cents a day, according to The Associated Press.
Assuming an average of $15 dollars in profit per $100 loaned currently, the new law will mean a 91% reduction in gross profits. That’s the money available to the business owner before taking out costs for leasing space, insurance, employees, loan origination… the list goes on.
Imagine if McDonald’s were only allowed to charge $.08 for what is currently a $1.00 double cheeseburger. How long do you think McDonald’s would be able to continue selling those or anything else?
NH citizen to payday lending small business owner: “tough luck”
July 16, 2008 | New Hampshire | Comments (3)David Martin, who owned a small payday lending business, wrote in to the Concord Monitor last weekend to share the consequences of the recent New Hampshire payday lending legislation: he lost his business. In response today, Cary Gladstone (who looks to be an employee of a non-profit organization) tells Mr. Martin and his customers to stop bellyaching:
To Mr. Martin’s customers who ask why his store is closing, an accurate response might be that he cannot run a lending operation profitably on 36 percent (or less) loans, as many other financing institutions are able to do.
Pray tell, which financial institutions are able provide small, short term loans for 36% APR? Payday Pundit would like an answer because that is a business plan that should be taught in all the major business schools and replicated throughout the country. Gladstone goes on to write:
Bank loans and credit cards at triple-digit rates would be the subject of investigation by regulatory bodies.
Really? Because a bank overdraft fee of $29 dollars on a $100 overdraft, paid back in a week, roughly works out to 1500% APR. Cary should probably alert Congress to get that investigation started.
This letter is rife with misunderstanding and myth about payday lenders — it is indicative of the ignorance that has led to short-sighted legislation and the loss of jobs and businesses of people in New Hampshire.
John Lynch closed my business
July 9, 2008 | New Hampshire, positive media coverage | Comments (0)I’ve been alerted that the following letter was published in the Manchester, New Hampshire Union Leader on July 9th. If anyone can find an online link, please send.
Gov. John Lynch closed my business
To the Editors:
My name is David Martin. I own Colortyme Payday loans in Manchester. My partner and I are both longtime full time residents of New Hampshire. Our business is incorporated in New Hampshire and we are licensed by the state Banking Department.
Yesterday, Gov. John Lynch signed HB 267, eliminating payday loans in New Hampshire. I will be forced to close my business.
My costumers are hard working honest people who at this point in their lives are living paycheck to paycheck. They need these loans when they face unexpected financial emergencies. They are shocked when I tell them we are closing.
The first question they ask is ” Why are you closing? ” My answer is “Because the State has decided that you don’t deserve access to short term credit.” The second question they ask is “What am I going to do now?” The only answer I can give them is ” I honestly don’t know.”
David Martin
Update: It looks like this letter ran in the Nashua Telegraph on Sunday.
You’re fired! Gov. Lynch issues pink slips
May 12, 2008 | New Hampshire, Union Leader, employees, industry, media coverage, positive media coverage, regulation, states | Comments (0)
Sunday’s editorial in the New Hampshire Union Leader asks, “What, if anything, is the governor going to do for the 200 private-sector workers he personally will make jobless at the start of next year?”
A few excerpts:
Last week legislators essentially outlawed payday lending and title lending in New Hampshire. The industry employs roughly 200 people in the state. All of them will be out of work by Jan. 1. That’s when House Bill 267 takes effect. Gov. Lynch, who ought to know better, has said he will sign the bill.
The 200 employees in the payday and title loan industry will have to find new jobs because they are unlucky enough to work in a field the governor doesn’t approve of. The state has eliminated their jobs, and tough luck to them.
When it comes to making decisions about people’s livelihoods, Gov. Lynch has a history of picking winners and losers based on purely political calculations.
By banning payday lending, Gov. Lynch and legislators in New Hampshire will now have to answer to the 200 employees they’ve put out of work and the thousands of customers whose credit options have been yanked away.
So much for “Live free or Die”
May 7, 2008 | New Hampshire, industry, regulation, states | Comments (0)The New Hampshire house and senate have concurred. The effective date on the payday lending ban will remain January 1, 2009.
New Hampshire payday loan alternative
April 21, 2008 | Associated Press, New Hampshire, alternatives, industry, media coverage, states | Comments (0)Just a few comments on this Associated Press story about a new “payday loan alternative” in New Hampshire.
The article fails to mention a few key points:
1- St. Mary’s Bank is a credit union, not a bank
2- The MyPay product is offered in two loan amounts: $250 and $500. There is an 18% APR, along with a $15 fee for the $250 loan and a $25 fee for a $500 loan.
So, yes, it is a bit cheaper than a traditional payday loan, but keep in mind that credit unions are exempt from federal and state income taxes due to their status as not-for-profit financial institutions. They do not have to pursue a profit. And the majority of Americans do not have access to a credit union, as their membership is restricted to defined segments of the population.
We welcome St. Mary’s Bank into the payday lending market and believe competition is good for our customers. But while credit unions can provide another choice for consumers, they cannot be considered a replacement for payday lenders in New Hampshire.
National Review: What the Democrats have done to New Hampshire
April 21, 2008 | National Review, New Hampshire, industry, media coverage, positive media coverage, regulation, states | Comments (0)In New Hampshire’s 2006 election, Democrats were handed control of all branches of state government–for the first time since 1874.
Andrew Cline, editorial page editor of the New Hampshire Union Leader, writes about the consequenses of Democratic control in a column for National Review.
Now they are paying the price — literally. The orgy of taxing, spending, and regulating in which Democrats have indulged is threatening New Hampshire’s status as the New England state most hospitable to business and individual liberty.
Specifically about legislation to ban payday lending in New Hampshire:
Democratic legislators’ attempts to kill another industry were more successful: They passed a bill that will effectively kick payday lenders out of the state next year. The payday-lending industry had boomed in New Hampshire in the past few years, and not a single complaint had been lodged with the banking commission against any payday lender. Nonetheless, Concord decided it had to “protect” the citizenry, and placed a 36 percent cap on the interest rates charged on short-term loans. When that cap takes effect, a payday lender will be able to charge no more than $1.38 on a typical two-week loan of $100, instead of the $20 now charged. Some lenders have said they will continue to operate until the law goes into effect. After that, with their profits legislated away, they will leave the state.
New Hampshire payday lender speaks out
March 12, 2008 | New Hampshire, customers, employees, industry, media coverage, positive media coverage, states | Comments (0)Thanks to Dave for sending the following to Payday Pundit…
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New Hampshire is on the verge of banning payday loans. I own a payday loan office in Manchester, NH. The following is a letter one of my employees wrote to address this injustice.
Guest Shot: Appalled at Legislatures effort on payday lending
February 22, 2008 6:00 AM
I am a payday loan officer in Manchester. I have been very active with the current bill (HB 267) that has gone through both the House and the Senate.
This bill will eliminate payday loans in the state of New Hampshire by imposing a 36 percent APR cap. Thirty-six percent would mean for every $100 loan, we would make $1.36, this is not enough to pay normal maintenance for a company. I am appalled at the behavior of both the senators and House members in regard to these bills. It is my belief that instead of working in the interest of their constituents, they are working in the interest of the banks.
…In the past four years, the welfare department of New Hampshire has seen a drop in the number of people requesting assistance. Oddly enough these numbers coincide with when payday loans first started to emerge in the state. Instead of New Hampshire residents asking for government assistance, they are trying to make ends meet on their own.
…At the New Hampshire Senate hearing which was held on Feb. 14, Sen. Bargdon of Milford, admitted to having a limited knowledge of how payday loans work. Instead of voting with a lack of knowledge about the subject, he actually visited a payday loan office. He spoke to customers and loan officers. After getting an idea of what it is we do, he voted against HB 267 to eliminate payday loans, deeming payday loans to be a valuable service. Perhaps the vote would have gone differently had more senators took the initiative to visit or even call a payday loan office.
…HB 267 has left a number of people without an option and currently it appears that the only ones benefiting from its passage are the banks. The banks who will be making $30-$40 per overdraft fee. As stated earlier, these fees equated more than $30 million in one state, and that was within one year. It now seems as though the senators have lost the interest of the people and replaced it with an interest for the banking institutions. My concern is no longer for myself and the 200 other employees out of a job in the state of New Hampshire. My concern is where are our customers supposed to go?
Well said Ms. Simms.
