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 Posted: Tue Dec 18, 2007 2:30 pm Subject: Fed Report on Payday Loan Bans
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| Quote: | December 15, 2007
CFSA On Fed Report: We Told You So
When the Federal Reserve of New York released a shocking study last week implying that banning payday loans might not be the most prudent way to help the working poor, the financial world went crazy. It’s been a long-held assumption of the (quite sizeable) anti-fast cash loan crowd that the world would be a better place without cash advance lending. The assertion that the unpopular short-term, high-interest personal loans disenfranchise already-struggling lower-income consumers is not new, and to date, thirteen U.S. states have decided to “fix” the issue by prohibiting payday loans altogether.
The Fed took an in-depth look at North Carolina and Georgia, two states that have eradicated payday loans in recent years. Shockingly, the report gave evidence that the base of customers who had once taken out fast cash loans to get by are now making equally bad choices and finding themselves in comparable financial trouble – all without cash advance personal loans. Many had accrued significant bank overdraft charges, or were being “hounded” by collection efforts on bills that they had let go alarmingly delinquent. After so many years of debate, it seems that there was some credibility to cash advance lenders’ insistence that their products were a legitimate financial choice for many.
The Community Financial Services Association of America, the nation’s largest trade organization of payday loan merchants, basically scoffed at those who were shocked by the Fed’s report. In a press release reacting to the much-discussed study, the CFSA all but jeered “we told you so!” at their many critics. The CFSA claims that it mandates pro-consumer business practices for its members, and the Association’s spokespeople have maintained for years that fast cash loans are misunderstood by the general public. |
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goudah2424
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Posted: Tue Dec 18, 2007 2:32 pm Subject:
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| Quote: | Ban on payday loans may cause financial burden, report says
North Carolina, Georgia fare the worst
THE ASSOCIATED PRESS
CHARLOTTE
A ban on payday loans may be leading to greater financial burdens for low-income residents of two Southern states, according to a researcher at the Federal Reserve Bank of New York.
The study concluded that “compared with households in all other states, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate.”
North Carolina households have fared about the same, said the report, written by Donald P. Morgan, a research officer with the Federal Reserve Bank of New York, and Michael R. Strain, a graduate student at Cornell University.
“This negative correlation - reduced payday credit supply, increased credit problems - contradicts the debt-trap critique of payday lending,” the report concluded.
Payday lenders offer quick cash advances - for a fee - that customers are supposed to repay with their next paycheck. Borrowers who cannot repay the loan often “roll over” the loan repeatedly, a cycle that critics of payday loans call the debt trap. Borrowers are drawn to the lenders because, unlike banks and credit unions, they don’t run credit checks.
Georgia banned payday lending in May 2004. North Carolina has gone back and forth with payday lenders.
In 1997, the state began allowing payday loans. The law expired in 2001, and many small payday lenders closed, but the largest lending chains linked up with out-of-state banks to keep offering the loans. A banking commissioner’s ruling in 2005, followed soon after by a consent agreement between three payday lenders and N.C. Attorney General Roy Cooper, essentially shuttered the industry’s doors in the state.
“The thing is with payday lending, the business model itself is dependent on the debt trap,” said Uriah King, a researcher at the Center for Responsible Lending in Durham. “They couldn’t open up their doors if they couldn’t put short-term borrowers into long-term debt.”
King criticized the report because it drew on data from the Federal Reserve’s check-cashing centers in Atlanta and Charlotte, which processes transactions in states other than Georgia and North Carolina, including those that do allow payday loans.
Last month, a report by the UNC Center for Community Capital prepared for the N.C. Commissioner of Banks concluded “the absence of storefront payday lending has had no significant impact on the availability of credit for households in North Carolina.”
That study was criticized by Community Financial Services Association of America, a trade group that represents 60 percent of the industry, because it included survey response data from people who had never tried to get a payday loan.
“Households without access to payday loans are forced to use costlier credit and suffer greater financial difficulties,” said Darrin Andersen, the president of the financial-services association.
And while payday lending may not be the correct choice “all the time” for consumers, “it’s certainly a smart choice from the alternatives,” Andersen said. |
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goudah2424
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Posted: Tue Dec 18, 2007 2:39 pm Subject:
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I'm reading the Fed Report now . . . . It's really long . . .
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goudah2424
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Posted: Tue Dec 18, 2007 2:51 pm Subject:
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Good post Goudah, thanks for the heads up.
ladybug
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ladybug
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Posted: Wed Dec 19, 2007 7:39 pm Subject:
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I was reading the news a little bit ago and this article was posted in regards to Ohio and PDLs:
Payday Lending Crackdown
Reported by: Jenell Walton
Email: jwalton(at)wcpo.com
Last Update: 9:08 pm
| Quote: | Related Links
Ohio Attorney General
Some payday loan stores in the Tri-State are fighting back against lawmakers who said they're ripping people off by charging too much in interest.
However, some customers said they like having these payday loan stores.
It helps them out in a bind, but others said it's too easy to get caught in a cycle of debt.
People on both sides of the issue packed into this room at Working in Neighborhoods in Cumminsville for the Ohio Attorney General's public hearing on payday lending.
Brenda Walker of Lincoln Heights said she first borrowed money to pay for medicine.
"I borrowed $450, so I had to pay back $517," explained Walker, "So, automatically I'm already short that month."
Attorney General, Marc Dann, listened to many stories like Walker's.
He's encouraging state legislators to regulate payday loan stores by putting a 36 percent cap on loans.
"One of the inherit problems with this whole business, if somebody needs to borrow money now, whose a working class or middle class person, what's to tell them that they're going to have money two weeks later to pay it back, particularly at 391 percent in interest," said Dann.
However, the owners of check cashing centers say that cap would put them out of business.
They have to pay employees, rent, and utilities.
Checksmart gave the attorney general nearly 500 letters from customers who said they're fine with the current system.
"A lot of them are saying, hey, I use this product and I use it responsibly. So, please don't take this option away from me. I don't have any other options. The bank isn't going to give me a $200 loan. The bank isn't going to give me a $300 loan. They say they use the product responsibly and they know what they're doing," said Checksmart spokeswoman, Lisa Ferguson.
Legislators are working on a bill that would prohibit a check-cashing lender from making a loan to a borrower who has already taken out a loan.
It would also prohibit loan origination fees and check-collection charges.
The attorney general is traveling around the state for these public hearings. Dann said he hopes to get legislators to take action by early next year.
In the meantime, Dann said he may file lawsuits against the businesses who illegally threatened to prosecute people who have not paid their loans.
Copyright 2007 The E.W. Scripps Co. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. |
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blueangelkc80
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Posted: Fri Dec 21, 2007 7:41 pm Subject:
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Spam removed - Mike
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Shazzers
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Posted: Fri Dec 21, 2007 10:34 pm Subject:
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Are you serious, Guest? I'm still kicking myself in the ass for signing up there to answer the "super moderator's" payday loan question.
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Shazzers
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Posted: Sat Dec 22, 2007 9:30 am Subject:
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Just to let you know, I use both sites, depending on the research I need to do. I am a long supporter of this site and it doesn't hurt to have more than one site to obtain information.
Shazzers, and others, be careful what you wish for and say. There are individuals who moderate this site that don't know everything, but put forth the opinion that they do. That's probably why a number of long-time supporters of this site have decided to leave and look elsewhere for a less hardline (my opinion is the correct opinion) approach than some moderators offer here. IMHO.
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cajunbulldog
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Posted: Tue Dec 25, 2007 2:40 pm Subject:
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A lot of thoughts here: First, thanks Goudah for once again posting an article that was definately food for thought.
My feeling is that the households that are in the PDL trap probably are the ones that have financial challenges anyway and would have them without PDL's, but not being sucked into the PDL trap every two weeks has to make it a little easier for them. And as for Checksmart providing 500 letters praising their service, all I can say is it's easy to pressure someone to do it while they're in the store waiting on the next PDL. If you're scared and know that if you don't write a letter, it's implied you won't get another PDL, wouldn't you do it?
And as to the other website, all I can say is it's great that more people are in the fight to stamp out PDL's and wouldn't we be a force if we worked together? Just putting it out there...
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kscornell
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If it's SO GREAT, then why do you feel the need to SPAM this forum so frequently. eh? 
