Rate caps hurt poor people
September 2, 2008 | best practices, customers, industry, media coverage, positive media coverage | Comments (2)Professor J.R. Clark has a provocative op-ed out today that says poor people are hardest hurt by rates caps:
In the past 30 years, the democratization of credit has been one of the most powerful forces for economic progress by lower-income groups in the U.S. economy. In the 1990s, as interest rates continued their deregulatory trend begun more than ten years earlier, the number of homeowners in low- and moderate-income communities grew by 26.6%, which was nearly twice the growth rate of homeowners in high-income areas. The greatest gains accrued to the least well-off consumers primarily because the removal of price restrictions in credit markets benefits highest-risk borrowers the most.
When interest rate ceilings are imposed, they adversely affect the wellbeing of the very consumers whom they were intended to protect.
The whole thing is a must read.
News from 2006
September 1, 2008 | Center for Responsible Lending, best practices, industry, industry critics, media coverage | Comments (0)Scripps Howard is reporting on a Center for Responsible Lending study about military personnel and payday loans….from 2006.
Borrowers know the terms and still take out payday loans
August 28, 2008 | Deseret News, Utah, best practices, customers, industry, regulation | Comments (2)I don’t understand why the anti-payday lending groups can’t wrap their heads around this one.
Payday lenders are extremely clear about what taking out a loan will cost. They have to be, in many states what they tell borrowers is regulated and must be extremely clear. For CFSA member companies, according to CFSA’s Best Practices lenders need to show borrowers in writing and on big posters in their stores exactly what the terms are. Matter of fact, studies CFSA has conducted tells us that consumers choose payday loans because it is very clear.
To recap:
Lenders are up front about the terms of the loan.
Borrowers understand what the loan will cost them.
Borrowers still choose to take out the loan.
Anti-payday lending groups are confused, demand that payday loans be banned because borrowers don’t understand the terms of the loan.
Law students versus Internet lenders
August 21, 2008 | Wisconsin, alternatives, best practices, industry, local issues, states | Comments (0)We don’t know enough about the case to comment, but we thought this story about two law students leading a class action against an Internet lender was interesting:
Aspiring attorneys Nicholas Watt and Meredith Gray spent a good portion of their summer literally dotting i’s and crossing t’s.
As enrollees in the current session of the University of Wisconsin Law School’s Consumer Law Litigation Clinic, Watt and Gray recently helped draft one of the more substantial settlements in the 17-year history of the program.
The two first-year law students, under the tutelage of supervising attorney Sarah J. Orr, helped attain a preliminary settlement in a class-action suit against online payday lender Tremont Financial, LLC.
“I’ve never been one for details,” said Watt. “But this really forced me to make sure every word was perfect because of its impact.”
As stipulated in the July 25 ruling by Dane County Circuit Court Judge Sarah B. O’Brien, Tremont could be responsible for $60,000 in restitution to an estimated 137 Wisconsin residents who entered into loan contracts that the clinic alleges are in violation of the Wisconsin Consumer Act.
Now who can they blame?
August 10, 2008 | best practices, industry, media coverage, personal finance, regulation | Comments (0)Looks like effectively ending payday loans to military personnel hasn’t helped servicepeople (although, this reporter is confused and lumps payday lenders in with others that “target” the military):
“If our personnel are worried about their credit card debt or making the next mortgage payment, it will affect their military readiness with potentially deadly consequences,” Melnyk said.
Most new recruits, Melnyk said, don’t have good savings habits. “We want to change the spend-first, borrow-to-buy mentality that so many Americans grow up with.”
But it’s not just young recruits who are vulnerable. “The subprime market caught a lot of military families in a real lurch, just like any family,” said John Revell, spokesman for USA Cares, Inc., a Kentucky-based nonprofit that doles out grants to financially strapped military families and helps them avoid foreclosure or eviction.
National Guard reservists, who temporarily give up their civilian jobs when sent to war zones like Iraq or Afghanistan, are especially hard hit, he said. “When a husband or wife is deployed, there’s less income and less financial help available,” said Revell, whose company has given more than $5 million in financial aid to military families since 2003.
But denying servicepeople access to a short-term loan was supposed to help them. You mean, it hasn’t?
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.
Cleveland’s Bob Franz Show Discusses Payday Lending
April 25, 2008 | Ohio, best practices, industry, positive media coverage, states | Comments (0)Finally! Someone who “gets” it.
From this morning’s Bob Franz show on WTAM 1100…
“As long as you are up front and you tell people, you said you’ve got poster size, not fine print, in fact its great big bold faced, poster sized listings of your fees up front, anybody who walks in there knows full well what they are going to be charged. If they choose to sign on the dotted line and they agree to those terms, then why should the government be getting in the way at all? Why should they be trying to regulate how much you guys can make, regulate what interest you charge regulate any of your fees or anything else? If they are spelled out and people choose to do it anyway, I don’t understand how they can blame Checksmart or any of the others.”
Referencing CFSA’s mandated extended payment plan, Franz says, “Am I the only one that finds that extraordinarily generous?”
Franz speaks to a rep of the Community Financial Services Association, customers that have used the service and an employee of the industry.
Listen to the program at http://www.wtam.com/pages/bobfrantz/ondemand/. In the first hour, payday lending coverage starts 18 minutes and 30 seconds in. In the second hour, coverage starts 9 minutes 15 seconds in.
Making the fine print….BIGGER
March 19, 2008 | best practices, industry | Comments (0)With all of the talk of fee and market transparency in the credit markets…Payday Pundit wants to remind everyone of the steps the payday lending industry has proactively taken to address the concern over hidden fees and fine print.
The assault on market transparency
March 17, 2008 | best practices, industry, positive media coverage | Comments (0)Interesting post from Steele Street Blog, The Assault on Market Transparency:
“When a free market works it is a beautiful think. Adam Smith’s invisible hand graces many a bargain from flat screen TV’s to fast food. Supply and demand work as opposing forces in a tug of war as the market sets the price of goods and services. This process works when purchasers are able compare the quality of goods and services along with their price, among multiple sellers.”
We could not agree more. The best way to protect consumers is to give them the
information they need to make an informed choice. Consumers demand and deserve full disclosure of relevant information before they make a purchase.
To that end, CFSA member companies are required to display their fees in large type on posters in all of their stores. Before entering into the transaction, customers can compare the fee with their alternatives and decide if the product is right for them.
Audit finds CFSA “Best Practices” widely implemented
March 17, 2008 | best practices, industry | Comments (0)Global Compliance, an independent auditing company, found that 99 percent of CFSA-member companies were incompliance with the new Best Practices announced last February. In fact, as this news release indiciates, only five of the surveyed stores were not in compliance and among this stores, the infractions were minor.
