The Congress on Racial Equality issued a news release slamming the Center for Responsible Lending for comparing its critics to the “KKK.”   This name-calling is typical.  They don’t want to argue facts, so they smear their critics.    This is what we’ve come to expect from CRL. 

 http://www.expertclick.com/NewsReleaseWire/default.cfm?Action=ReleaseDetail&ID=20421

An article pennded by Dave Zweifel, appearing in today’s Capital Times – out of Madison, WI — says that state legislators need to “place some protection for the folks who all too often get suckered into small loans that wind up with triple-digit interest rates.”

This accusation might make for good copy, but is far from the truth.  Payday lenders have some of the most consumer friendly disclosure rules in the lending business. Our disclosure policy states that all CFSA member-companies will prominently display posters in their stores explaining their fees, and will post this information to their company websites.  Knowing the fees means that no one is getting “suckered”.

The American Banker is working on a story about the “success” of the FDIC small loan program.  About 30 small community bankers signed up for the program, but all the big boys passed on it.   CFSA spokespeople will be quoted in the story supporting a free market.   Story should run next week.

The Center for Consumer Freedom has a great letter to the editor in today’s USA Today responding to a recent editorial on payday lending.

“USA TODAY’s editorial on payday loans invoked the Federal Deposit Insurance Corp.’s (FDIC) stance in support of putting caps on these loans…But the FDIC’s own chairwoman authored a study in 2005 that painted a very different picture. Her report shows that payday loans can be a lower-cost option than bounced check or overdraft fees and that credit unions are sometimes not available as a reasonable alternative.”

Well said.

http://blogs.usatoday.com/oped/2008/02/keep-payday-loa.html

Kudos to North Carolina Public Radio journalist Janet Babin for this accurate, in-depth report on the payday lending industry in this piece from National Public Radio’s Marketplace program. The piece discusses new research that says payday loans can actually benefit consumers and that consumers in states without payday lending are driven to bounce checks or turn to other less desirable options.

The takeaway on this is simple – consumers benefit when there is competition in the marketplace.

One of the biggest problems with the payday advance debate is that too many reporters don’t do their homework and wind up getting their facts wrong.  Your Payday Pundit is pleased to see that there are still some newsies out there who take journalistic accuracy seriously and gives kudos to the Birmingham (AL) News for doing the right thing with this correction:

http://www.al.com/birminghamnews/stories/index.ssf?/base/opinion/1203758117258680.xml&coll=2

Your Payday Pundit particularly loves this line from the correction:

“The editorial should not have criticized the payday-loan industry for these practices.”

‘nuf sed.

Commercials by the Community Financial Services Association feature REAL employees and REAL customers – the two populations whose opinions about payday lending tend to be ignored in the debate.  Unfortunatly, the voices of those who have actually used the product or worked in a store are overshadowed by the shouting of those who’ve never needed a payday loan or stepped foot in a store. 

 

Your Payday Pundit is working on a scoop that nobody in the media has yet picked up on involving the “Better Choice” program recently enacted in Pennsylvania. 

Payday advance lenders are all about free markets and competition because they ultimately bring better value to consumers.  But a close look at the Pennsylvania Better Choice program reveals a scheme that forces borrowers to increase their debt, provides a windfall for participating credit unions, and destroys consumer choice in commercial banking options.

How does it work? 

The Pennsylvania Better Choice program has several requirements, including:

• You must be a member of a participating credit union
• You must pay a $25 application fee
• You must take out a loan for 10% more than you need
• You must pay an APR between 13% and 18% 

Given these mandatory requirements, let’s take a look at one ordinary scenario.  A person needs $300 to fix a broken water heater.  If they want a Better Choice loan, they have to first be a member of the credit union.  If they’re not a member, they can’t get a loan, period.  If they have a savings or checking account at a different bank, they can’t get a loan, period. 

If they really want the loan, they must join the credit union, which means opening a new credit union account, regardless of how many other bank accounts they may have at other institutions.

 

Once that’s done, they sit down to figure out the terms of the loan.  The $25 application fee is added to the loan amount, raising the loan balance to $325.  Then, the credit union compels borrowers to add another 10% of the loan request – $30 for a $300 loan – to the loan balance, making a grand total principal loan balance of $355.  A heck of a deal for someone who only needs 300 bucks.

Now here’s the really interesting part. The additional $30 tacked on to the loan amount is deposited into the borrower’s credit union account.  The borrower can’t touch that $30 until the loan is paid off and the $30 does indeed earn interest.  Once the loan is paid off, the borrower has access to this $30 in their savings account plus the interest earned. Sounds good, right?

Look closer

Payday Pundit has chosen one particular credit union to make this point.  We have nothing for or against this particular credit union, we’re just using it as an illustrative example.

The Riverfront Federal Credit Union offers Better Choice loans with the aforementioned terms and an 18% APR.

http://www.riverfrontfcu.org/BetterChoiceLoan.asp

Now check out their rate of return on a money market savings account.  With a $500 minimum, the money market account pays 1.75% APY.

http://www.riverfrontfcu.org/mon_mar.asp

A new study says that payday lenders locate in communities with large Christian conservative populations. This on the heels of  prior allegations that payday lenders locate in communities with high populations of minorities, women, immigrants, the elderly, the poor, the middle-class and now conservative Christians. A recent BusinessWeek article even said payday lenders are now targeting more affluent neighborhoods.

Who’s left? This is preposterous.  

The only thing payday loan customers have in common is that they all have steady sources of income and bank accounts and sometimes have unexpected or unbudgeted expenses that require cash between paychecks.

While critics of the industry assign labels to payday lending customers in an attempt to further their political agendas, the fact is that payday lenders provide services to a broad cross section of Americans because there is a broad demand for the financial service provided. Payday lending customers represent a broad demographic segment and cannot be grouped based on race, sex or religion.

Full CFSA press release 

Now that the payday loan industry has been effectively banned from loaning to the military, Air Force personnel will now rely on charity.   The Air Force Society is creating a “short-term loan product” that is essentially free (at least if you’re lucky enough to be int he Air Force.) 

http://www.bizjournals.com/sanantonio/stories/2008/02/25/daily19.html