CBS hit piece misses target
July 28, 2008 | industry, media coverage | Comments (1)The CBS Evening News had a segment tonight on payday lending. Like much of the mainstream media pieces, it focused on a couple of extreme examples of customers who got themselves into a cycle of debt. Missing from the piece were:
- People to represent the large majority of consumers who appreciate the service and use it responsibly;
- Context about the reasons consumers use payday loans such as avoiding bounced check fees, fear of missing an important payment, etc.; and,
- An acknowledgement that the industry is making great strides in protecting consumers and avoiding the types of stories that the segment presented.
As is usually the case, the industry was ably defended by spokesperson Lyndsey Medsker, who despite sitting through a 25 minute interview with CBS, was given about 12 seconds of air time.
Penn. to regulate Internet lending
July 28, 2008 | alternatives, best practices, industry, local issues | Comments (1)Now that’s a good idea. Here’s the story.
For what it’s worth, CFSA members are required to follow a Best Practice on Internet Lending.
A member that offers payday advances through the Internet shall be licensed in each state where its payday advance customers reside and shall comply with the disclosure, rollover, rate, and other requirements imposed by each such state, unless such state does not require the lender to be licensed or to comply with such provisions, or the state licensing requirements and other applicable laws are preempted by federal law.
Comment of the day
July 28, 2008 | alternatives, industry, personal finance | Comments (0)Commenting on the “Consumerist” item below, regular reader Jon Schultz writes:
I think most payday loan borrowers would like more time to pay back their loans, and if payday lenders gave them, say, six months to repay, the APR would be reduced to around 30% (at $15 per $100). But the problem is that the default rate would skyrocket, as payday lenders lend to people who are in difficult situations, who have bad credit or whose credit cards are maxed out, who may also borrow from other sources, who may lose their bank account, who may already be thinking about filing for bankruptcy, and/or who have not been on the job all that long and may lose their job. If credit unions give long-term loans to these people at double-digit interest rates they will simply lose money, and that’s why so few of these loans are being made.
The “consumer advocates” will argue that such people should simply not be lent to, but they are wrong as customer satisfaction surveys show that most people benefit from their use of payday loans – http://www.cfsaa.com/customer_demand.html – and for some people with a real emergency a payday loan can be a lifesaver.
Limiting loans from your 401k
July 28, 2008 | alternatives, customers, industry | Comments (0)The U.S. Senate is concerned about citizens taking loans against their 401k plans. They want to limit the number of permissible “outstanding” loans to three. But wait, isn’t having two “outstanding” payday loans enough to force legislators into fits of outrage.
It seems to us that a payday loan is a much, much better choice than borrowing money against your retirement.
Ohioans have right to repeal bad laws
July 28, 2008 | Columbus Dispatch, Ohio | Comments (4)Kim Norris, the never-tiring spokeswoman for the Committee to Reject H.B. 545, submitted an eloquent defense of the Ohio referendum to the Columbus Dispatch this weekend. She argues, correctly, that Ohioans have a right to repeal bad, misguided legislation. Kim also reminds us that so much of the anger directed at the payday loan industry comes from a fundamental misunderstanding of how the industry works:
The facts about how a payday loan is made are critical yet continue to be misrepresented. The typical payday-loan customer is a hard-working Ohioan. If a consumer takes out a payday loan, he must have a steady income and a checking account. If he takes out a $100 loan, he pays a $15 fee — that’s 15 percent. The only way to get to the 391 percent annual percentage rate is to renew this same loan 26 times for an entire year, a practice prohibited by most states.
The Ohio legislature failed in its mission to serve the people of Ohio — and it made the wrong decision on payday lending. Now, as Kim writes, “[c]ommon sense says, it’s time to let consumers decide.”
Ohio update: Reject H.B. 545 link
July 28, 2008 | Ohio, industry | Comments (0)We’re posting the link to the RejectHB545Committee website again in case some of our readers missed last week’s posting.
Jonas does the “West Coast Swing”
July 28, 2008 | alternatives, industry | Comments (0)Apparently, it’s a dance. We learned this reading the new posting at paydayfacts.org which takes on banks, credit unions and “Left coasters.”
The Consumerist compares apples to oranges
July 28, 2008 | Washington Post, alternatives, industry critics | Comments (1)The Consumerist did a little dance on the grave of payday lenders over the weekend in touting the Washington Post story about credit unions filling the gaps after payday lenders left D.C. However, all they demonstrated was that they don’t get it:
Payday lenders whined that lending without 300% APRs was utterly unaffordable, but credit unions are proving that it’s possible to make long-term, low-dollar loans with interest rates as low as 16%.
NO, payday lenders pointed out that they couldn’t make SHORT-TERM loans. So the Consumerists thinks that rather than have competition between the payday lenders’ short-term loans and the credit unions’ long-term loans, consumers should be forced into one service. And that blog calls itself The Consumerist?
Who’s Missing from the Payday Loan Debate?
July 28, 2008 | alternatives, industry | Comments (1)Ellen Seidman of the New America Foundation asks that question in response to the Washington Post piece over the weekend. Her view about payday lenders runs counter to that of the Payday Pundit, but she makes a good point: why can’t state governments work with payday lenders to figure out a workable solution?
According to the New America Foundation it’s time for traditional payday lenders and banks to “come to the payday alternative table. With good, scaleable and sustainable alternatives.”
Payday Pundit is confused. New America wants to eliminate payday lending, but then wants payday lenders to offer “good, scaleable and sustainable alternatives?”
They use Washington D.C. as an example where payday loans have been banned and credit unions are not filling the void (260,000 loans versus a few hundred). And, according to the District’s Department of Insurance, Securities and Banking, some DC residents are now getting their payday loans in Virginia or on the internet.
We’re shocked
July 28, 2008 | alternatives, personal finance | Comments (0)It’s back to school time and credit card companies are targeting students. From the Christian Science Monitor:
While families are struggling to put together a college finance package to limit student debt, their good intentions are being undermined. Many universities and alumni associations are consorting with credit-card companies to encourage college students to sign up for credit cards and, more recently, debit-student ID cards.
Some universities and alumni groups engage in exclusive agreements with credit-card companies, selling their student lists, allowing use of their trademarked logos, and granting access for on-campus marketing, featuring gimmicky giveaways of food, sports toys, and clothing upon completion of a credit-card application.
The Payday Pundit wonders why there are no congressional hearings.
