Several stories this week have surfaced on this issue, and for a Friday we thought you might want to watch some video coverage. As mentioned in the story, the latest report out of the DFI in Washington shows that, of the licensed entities of which the DFI tracks, consumers paid $122 million dollars less in payday loan fees than they did in 2009. But what we want to know is whether or not these numbers include unregulated entities? Does the DFI accurately portray the full lending picture in Washington?

Such restrictions on payday lending would merely force consumers to use higher cost providers, some of which are unregulated and unlicensed. In the wake of the Washington state restriction, some regulators and legislators said that they have seen an increase in consumers turning to unlicensed and unregulated lenders who may operate beyond the reach of state regulators.

Unlicensed lenders are not accountable to the state either through state examination or compliance standards. DFI’s enforcement chief said that even if the agency can get a subpoena to go after an illegal lender, it’s difficult to get a response and difficult to enforce the subpoena because the lender is either out of state or in another country.[1]

In a story that came out in The Missourian today, we were glad to see some reporting that had a balanced perspective, offering opinions from the opposition and also what would happen if you placed restrictions on payday lending. Who would be affected the most, you ask? Consumers, and access to much-needed, and affordable credit options…of course!

Saku Aura, an associate (sic) professor of public economics at MU, said he believes the ballot initiative could prove beneficial in some ways, but might make it harder for people to get credit in the long run.

While Aura acknowledged claims that people are struggling with these loans and making irrational decisions, he added that “it’s also true that many people are using this loan as the last resource because they don’t have access to any other type of credit.”

He said the ballot initiative could lead to the disappearance of payday lenders or a dramatic change in the services they provide.

Continued coverage from the WoonSocketPatch.com.

According to the article:

CRL estimates that $3 million per year is being sucked out of the Rhode Island economy by nationally run payday loan companies, such as Check ‘N Go of Ohio and Advance America of S.C.

IHS Global Insight conducted a comprehensive study analyzing the economic impact of the payday loan industry nationally and in states with storefront locations. Findings illustrate “measurable and significant” economic benefits to local economies directly through employment, compensation and taxes, as well as through indirect and induced relationships with suppliers and other industries.

SOME KEY FINDINGS:

The industry contributed over $5 million to Rhode Island’s gross state product (GSP) in 2007.

The payday lending industry supports 74 jobs1 in Rhode Island, including 42 people directly employed in13 storefront locations.

• The industry indirectly created another 10 jobs in supplier industries.
• Payday loan store and supplier industry employees induced the creation of 23 jobs through the purchase of goods and services using earned wages.

In Rhode Island, the total labor income impact from the payday loan industry is nearly $3.2 million:

• Through direct employment, payday loan stores contributed $1.7 million in labor income.
• Suppliers to the payday lending industry contributed $480,000 in labor income as an indirect result of the revenues generated by the payday loan industry.
• $1 million was generated from the wages of payday loan store employees and supplier industries’ employees as they were spent in Rhode Island’s economy.

A bill moving through Rhode Island could restrict access to credit for consumers in the state.

Part 1 of a story coming from the WoonSocketPatch.com:

A House bill (H5562) sponsored by Rep. Frank Ferri (D-Warwick) would repeal payday lenders’ special exemption, cap payday loans at a 36 percent annual interest rate …

Evidence shows that states that have seen restrictions, such as interest rate caps, access to short-term credit has all but vanished. Such a prohibition would drive licensed and regulated entities like CFSA members out of the marketplace and drive consumers to higher cost providers, many of which are unregulated and unlicensed.

The best way to protect consumers is to ensure that they understand the actual cost of the loan. And when you take a look at the other short-term products out there, consumers can make an informed decision for themselves. A payday advance compares favorably to many consumer alternatives, even when expressed as an APR for two-week terms:

• $100 payday advance with a $15 fee = 391 percent APR
• $100 bounced check with a $28 overdraft protection fee = 730 percent APR
• $100 credit card balance with a $35 late fee = 913 percent APR
• $100 bounced check with $60.47 Non-sufficient funds and merchant fees = 1,577 percent APR
• $100 utility bill with $46.16 late/reconnect fees = 1,203 percent APR

An op-ed in Janesville, WI paper want tougher restrictions on payday lending.

Missourians travel to Ohio to protest JP Morgn.  Story gratiously mentions payday lending. 

Dallas Morning News weighs in on pending payday lending legislation.

Payday lending mentioned in Denver Mayor’s race article.

A city councilman in California clearly doesn’t understand payday lending, hence this story:

A Daly City council member is introducing legislation that would permanently ban any new payday loan businesses from opening in the city and phase out the seven lenders who are already in town.

These stories make the headlines as much as Charlie Sheen.

The Washington State Department of Financial Institutions is warning consumer about fraudulent online lenders.

Short-term credit services have become campaign fodder in Dallas. You would think a city with 1.3 million people would have bigger issues to discuss.

A North Carolina newspaper goes all Shakespeare in a diatribe attempting to justify why payday loans should remain outlawed in the Tar Heel state. To allow consumer freedom or not allow consumer freedom, that is the question.

… N.C. General Assembly is considering House Bill 810, which would relax restrictions on “consumer finance” companies that include predatory and payday lenders.

 

Local governments who restrict legal businesses through zoning confuses The Pundit. This time a village in Michigan is trying to stop its citizens from using short-term credit services.

Zoning board officials said they do not want such businesses to become too prominent, and would like to see more variety in the types of companies in the village.