Tommy Moore discuss the negative impacts of payday loan bans in his most recent LTE.

In a letter published in the Virginian Pilot today, CFSA’s Executive Vice President Tommy Moore takes issue with the ”compromise” legislation that he says painted ”all borrowers with one broad brush.”  From Tommy’s letter:

“Opponents of our industry have always been singularly focused on the elimination of this industry through outright repeal or by placing prohibitive restrictions on the product we offer to consumers. Virginians deserve the freedom to make their own financial decisions, choosing credit products that best suit their needs and their families.”  

Just came across a blog by a surgeon in Ohio discussing the high taxes he paid in the Buckeye State.  In case Mr. Buckeye Surgeon is not paying attention to the debate over payday lending in Ohio…he may want to read what the National Taxpayers Union had to say about the impact a ban on payday lending would have on taxpayers.  The excerpts below discuss a proposed ban in Virginia. In Ohio, the numbers are even greater, with millions more customers, nearly 1,600 storefront locations and 7,500 Ohioans employed by the industry.

…Close to half a million people would still need to get emergency funds from some other source besides payday loans. That source could be taxpayers.

…Banning payday loans runs counter to all the political lip service that is paid to personal responsibility and self-reliance.

…In addition, many citizens would be forced into unemployment if the industry were to be eliminated – again, squeezing taxpayers as well as the commonwealth’s budget. Across the state, about 2,400 Virginians employed by the payday-lending industry would lose their jobs, their health insurance, and other benefits. State legislators must ask themselves whether the Virginia economy – despite an overall downturn in the U.S. – is really so robust that they can afford to vote 2,400 jobs out of existence.

“We appreciate the effort of the General Assembly and Governor to forge a compromise on a complex issue; the result is one of the most restrictive payday-lending laws in the country. In addition, Governor Kaine deserves  credit for acknowledging that the work of the General Assembly was difficult and that the compromise developed during the legislative process represented a careful balance, which should now be given the chance to work.

“Still, we continue to have concerns about how lenders will be able to operate under this regulatory framework and how consumers will adjust to what is essentially a new credit product. The additional regulations included in this legislation change what consumers tell us they like about payday loans – that they offer a simple, transparent and straight-forward avenue for managing unexpected expenses. Some lenders will no doubt be forced to close as a result of this new law, and others will be significantly impacted.

“We have always maintained that the best consumer safeguards ensure continued availability of payday loans while protecting those who misuse them and other financial products. But we have difficulty with painting all borrowers with the same broad brush; this legislation does that, and unfortunately penalizes responsible borrowers. It does not effectively balance protections from excessive debt and preserving access to credit.

“Our customers recognize that payday loans are often their least-costly option, helping them to avoid unregulated alternatives like off-shore Internet lending operations as well as recurring debt or stiff fees associated with credit cards, bouncing a check or neglecting a bill.

“Opponents of our industry have always been singularly focused on the elimination of this industry through outright repeal or by placing prohibitive restrictions on the product we offer to consumers. Virginians deserve the freedom to make their own financial decisions, choosing credit products that best suit their needs and their families.

– Tommy Moore, Executive Vice President, Community Financial Services Association

Having published multiple editorials in support of banning payday lending (including one this morning), the Daily Press has moved on to advocating for the ban of car title loans.

I’d like to ask the Daily Press if there is any form of short-term credit they believe Virginians should have access to.  Maybe the Daily Press should dedicate some of their revenue to a short-term loan program to actually help hard-working Virginians who find themselves short of cash between paydays.  That would be more helpful than advocating for bans on everything.

Virginia’s General Assembly has moved a payday advance bill to the desk of Gov. Tim Kaine that restricts consumer choice on when and how often consumers may have access to credit.  The measure, which Kaine has indicated he will sign, includes a complicated schedule of new loan applications and makes it illegal for a consumer to take out more than five loans in a 180 day period.

Jamie Fulner with payday advance company Advance America summed up the risk to consumers by pointing out how the new restrictions could force working families into more costly personal finance alternatives:

“If (consumers) decide that in a 180 day period that they need a sixth payday loan to help them bridge the gap between paychecks and that option is not available to them any longer then they may be force to turn to more expensive options such as bouncing a check or paying their overdraft protection fees or paying their bills late.”

The Federal Reserve Bank of New York has already conducted an in-depth study of the problems consumers face when payday advances are banned in certain states, and it’s not known how much pain the new restrictions will cause borrowers in Virginia.  But one thing’s for sure – the words of Judge Gideon J. Tucker never rang truer when, in 1866, he observed:

“No man’s life, liberty or property are safe while the legislature is in session.”

Amen to that, your honor.