Middle-Income

• Majority earn between $25,000 and $50,000

Middle-Educated

• 94 percent have a high school diploma or better
• 56 percent have some college or degree

Kathleen Moore, CFSA’s director of partnering and program development, who previously worked at Habitat for Humanity, insists that such outreach programs have nothing to do with politics or generating business for her members. “I do not promote payday lending. This is part of our giving-back agenda,” she says. “None of our outreach is targeted at ethnicity.”

Damned if you do, damned if you don’t.  The Payday Pundit discussed the Mother Jones article in an earlier post.

ACCESS TO SMALL, SHORT-TERM LOANS CRITICAL FOR WORKING FAMILIES
Urban Institute report recommends better disclosures and increased competition to protect consumers

WASHINGTON, DC–A new report by the Urban Institute finds that if payday advances are eliminated they “could be replaced by alternatives that make families even worse off.”

 In “Enabling Families to Weather Emergencies and Develop the Role of Assets,” by Signe-Mary McKernan and Caroline Ratcliffe, the researchers find that low-income working families need access to small loans, such as payday advances, to help weather bad patches.

Instead of regulating prices charged on small, short-term loans, the authors argue that increasing competition will drive prices down. They express concern that regulating prices “would make fewer small, short-term loans available” and suggest that prices can be driven down, not by setting rates, but by “regulating disclosures; requiring licensing, reporting, and examinations; and creating incentives for financial institutions to provide small loan services.” 

 “The Urban Institute understands that eliminating payday advances is not in the best interest of working families,” said D. Lynn DeVault, president, Community Financial Services Association of America. “Its recommendations ensure that consumers would be aware of all of the fees associated with a credit product so they can compare their alternatives and make an educated decision based on what is best for them.”

Specific policy recommendations in the Urban Institute report:  

• Disclosures. Regulate standard, clear, and timely disclosures of the total loan cost so consumers know their full obligation and can easily compare what various lenders charge for loans…Stating the fee as a dollar amount instead of or in addition to the annual percentage rate (APR) may be easier for consumers to understand on short-term loans. 
• Longer-Term Products. Develop a longer-term loan product for habitual users—those who rely on short-term loans frequently or for long periods—is needed. Regulating disclosures and creating incentives for traditional financial institutions to provide small loans would create this product de facto.

Highlights available at http://www.cfsa.net/FullDisclosures.html.