On Friday, some North Carolinians will provide input on what the CFPB should look like.

————————–

Peter Skillern, executive director of the Community Reinvestment Association of North Carolina, explains that while the CFPB has a directive, how it will be accomplished is still open for input.

“This is an opportunity for North Carolina advocates, lenders and policymakers to say what we hope the CFPB would look like and what it will do.”
—————————

Skillern’s group is sponsoring the local meeting. The invitation-only forum is being held at the Friday Center, Chapel Hill.

Gee, I wonder what groups are invited.

Everybody falls into debt sometimes. Whether it’s your students loans, your credit card that you forgot to pay last month, or just an overdraft in you bank account.

But if you’re living or studying in North Carolina, things might just be a bit easier. The North Carolina State Employees’ Credit Union NCSECU) understands that things come up in life that might put you in need of cash, a loan, or make you late on a payment or two. And they’ve got a bunch of solutions.

According to creditbuildersalliance.org, the NCSECU is the biggest “payday lender” in North Carolina. This basically means that the NCSECU gives out small, short-term loans that help borrowers cover longer-term debt. This is also sometimes known as a cash advance.

Why doesn’t the state allow some competition from the private sector?

Smith said that banks should be accessible to deserving poor families so they aren’t forced to use “alternative financial services.” He was referring to companies such as payday lenders, which have been accused of high rates and abusive practices.

You would think a banking commissioner would understand the finances of the business.

We still believe this is the most responsible credit option, particularly when compared with the cost of overdraft protection, credit card charges, or refund anticipation loans often used by lower income individuals. Unlike the tricky terms of frequently criticized consumer loans, traditional installment loans are simple, understandable and sustainable.

Wonderful. The same foxes who have been guarding the Wall Street henhouse would get one more law not to enforce. CFPA must be free-standing, headed by a presidential appointee, as in the House-passed legislation. Otherwise, it is just a cruel joke on consumers.

The only joke on consumers will be when they realize that the CFPA eliminated their financial choices under the guise of “protecting” them.

“I’ve told our banks explicitly that the conduct of these programs [cannot be like] a loan,” said Smith, whose agency regulates state-chartered banks such as BB&T and not national banks like Bank of America and Wachovia. “It’s not an extension of credit. It’s essentially a service fee for a service rendered to keep someone for overdrawing. And I have generally otherwise stayed out of it.

The Payday Pundit thinks North Carolina should try an experiment.  Enact a payday lending law that increases competition with banks and gives consumers real choice.  

“The good guy image of the Center for Responsible Lending, a Durham nonprofit that has emerged as a high-profile advocate on consumer issues, is being scuffed up by a $15 million donation from hedge fund investor John Paulson.

Paulson and his New York-based Paulson & Co. have made billions by short- selling subprime mortgage-backed securities, an investment strategy that bets the price of the securities will head downward.

At issue now is an effort in which the Center for Responsible Lending, or CRL, lobbied on behalf of a change to U.S. bankruptcy law that would give bankruptcy judges the authority to lower the values of first-time mortgages in the settlements they write in cases that come before them.

The power, currently being debated in Washington, D.C., while a boon to consumers, would lower the value of the bond packages that include these mortgages — a benefit to investors who take short positions.

Read full article (BizJournal subscription required).

As states look at consumer credit issues it’s important that they look at the facts and carefully examine the real impacts of legislation.    The Federal Reserve staff study does just that and finds that one of the unintended effects of such legislation, which we see in states like Georgia and North Carolina, are increased credit problems for consumers.

To ignore what is already happening to individuals in states without payday lending and to continue on an assault on an industry which provides a better option for many in a short-term credit crunch is foolish and damaging to consumers.  Legislating payday loans into fee structures which are impossible to operate under extinguishes consumer choice.  We already see that individuals are forced to turn to more costly credit options when payday loans aren’t available.

The Open Markets Blog of the Competitive Enterprise Institute took note of this and posts on the report.  Kudos for highlighting this important piece of research.