NEWS: Consumers "Get By Just Fine," Says Cordray, Ignoring Bounced Checks, Illegal Loans and Bankruptcies

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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: May 11

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Consumers "Get By Just Fine," Says Cordray, Ignoring Bounced Checks, Illegal Loans and Bankruptcies

In testimony before the House Financial Services Committee, the director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, doubled down on the Bureau's refusal to acknowledge the distinction between legal and illegal short-term lending, or the proven negative consequences of banning regulated lending.

Under questioning from Representative Blaine Luetkemeyer (R-Mo.), Director Cordray said that 14 states have no payday loans and "that's tens of millions of Americans in those states that seem to get by just fine." Congressman Luetkemeyer pointed out that there is in fact short-term lending in those states-though a more costly and dangerous kind from offshore, unregulated lenders and other inferior alternatives.

In fact, the CFPB's own data shows that consumers in states that ban payday lending complain more about payday loans than those in states with regulated lending.

This is just the latest example of the Bureau ignoring the fact that where regulated short-term lending is restricted, unlicensed, unregulated lending proliferates. Just last week, a CFPB email newsletter featured the story of a Pennsylvania borrower who was taken advantage of by a lender - at least the third time the Bureau has cited a complaint in that state. In both cases, the Bureau failed to acknowledge that storefront short-term lending is banned in Pennsylvania - the consumers in these stories had undoubtedly borrowed from an illegal lender, probably offshore, and so the CFPB's proposed limits on access to short-term credit would do nothing to protect them.

Again this morning, Director Cordray chose to ignore Congressman Luetkemeyer's reference to unlicensed, illegal lenders and responded that "in the states that do not have payday lending, people find many other ways to meet that need."

Indeed they do find other ways:

They bounce more checks, complain more about illegal lenders and debt collectors, and file for bankruptcy at a higher rate than in states where short-term loans are available, according to a Federal Reserve staff study.
They find a lesser supply of alternative financial options and resort to costlier, unregulated options for short-term credit, according to reports from the U.S. Department of the Treasury, in contract with The Urban Institute.
Montana, Oregon and Washington state regulators all reported significant increases in online lending and related complaints after implementing restrictions on short-term lending.

The fact is that if the CFPB succeeds in its crusade to drastically limit the availability of regulated short-term credit, consumers will face a choice between more expensive alternatives such as overdraft programs or late payment penalties, or the very real risks of unlicensed lenders, who offer higher cost loans with none of the consumer protections that state- and federally-regulated companies provide. ADVANCE AMERICA

Oklahoma Governor's Veto of Payday Lending Bill Shows Misunderstanding of Economics, Liberty

Payday lending is one of the most reviled businesses in society. Some American Christians even regard the practice as a sin. Probably even a majority of those who mouth their support for the "free market" favor government restrictions upon (if not the outright banning of) "payday lending."

Therefore, it is not surprising that Oklahoma's Republican Governor Mary Fallin recently vetoed a bill passed by the Oklahoma Legislature that would make minor reductions in government control over the practice.

In her veto message, Fallin stated, "House Bill 1913 adds yet another level of high interest borrowing (over 200 percent APR) without terminating or restricting access to existing payday loan products. In fact, I believe that some of the loans created by this bill would be MORE EXPENSIVE than the current loan options." (Emphasis in original.)

This assertion that the annual percentage rate (APR) for a two-week payday loan is 400 percent (or some such ridiculous amount) is nonsensical, unless the borrower intends to pay a $200 loan back over the span of an entire year.

Under current Oklahoma law, a person may not borrow more than $1,000 from a payday lender. The bill vetoed by Governor Fallin would have permitted someone to borrow $1,500 more. Fallin considered this "stacking their liabilities for repayment on these high interest loans."

Fallin noted that she had vetoed a similar bill to loosen restrictions on payday lenders in 2013 because she had "concerns with the frequency [that] low-income families in Oklahoma were using these lending options, and the resulting high cost of repayment to those families."

In a recent poll by Morning Consult Governor Approval rankings, which polled 85,000 registered voters across the country in the first three months of the year, Fallin's 41 percent rating made her the fifth-least popular governor in the country. Her approval marks in Oklahoma declined precipitously after she vetoed pro-gun rights and pro-life legislation during her second term.

While this most recent veto, which would have loosened the restrictions on payday lending in the Sooner State, is no doubt much more popular, this only demonstrates vividly that the principles of free enterprise and limited government are supported more in the abstract than they are in reality. Read more at THE NEW AMERICAN

FACTORTRUST'S UNDERBANKED INDEX REVEALS TRENDS OF $105B UNTAPPED MARKET

Buying, Spending Habits of Underbanked Reveals Opportunities for Lenders

ATLANTA - FactorTrust, The Alternative Credit Bureau, today released its Underbanked Index, highlighting quarterly insights of the earning, spending and living habits of underbanked consumers-a $105B untapped market. The analysis is derived from FactorTrust's proprietary alternative credit data used in analytics and risk scoring solutions by lenders to make informed decisions about consumers they want. This Index highlights the demographic characteristics, credentials and capacities of the underbanked, like the trend of median loan values among this segment increasing as incomes increase.

"As the leading alternative credit bureau, our updated Index on underbanked consumers is another educational resource we provide the industry that sets us apart," said FactorTrust CEO Greg Rable. "We continuously update our findings to help lenders, as well as interested associations, analysts and media, to better understand the demographics of this growing segment of the consumer population."

Determining which consumers are borrowing, how much they borrow, and their income assists lenders with determining right-pricing opportunities and term setting appropriate for the underbanked market.

Additional findings in the Underbanked Index include:

Age & Gender:

The average age of underbanked consumers at the time of the loan application is 39, and the average age of the borrower in 41. The average loan amount borrowed trends upwards with age, peaking at 45. This trend has shifted to a slightly older demographic over the course of the last several years, due in part to growth in the diversity of products, channels of delivery and average size of loans.

Income & Loan Amounts:

While the average income for applicants is $2,712 ($32,544 annually), for borrowers, the average is slightly higher at $2,936 ($35,232 annually).

Read more at FACTORTRUST

NAFCU Letter to CFPB re: Small Business Lending

WASHINGTON, DC (May 10, 2017) - NAFCU Regulatory Affairs Counsel wrote to the Consumer Financial Protection Beureau (CFPB) urging the bureau to exempt the credit union industry from any future rulemaking that would require further disclosure of business loan information.

"Credit unions serve distinct fields of membership, and as a result, institution-level data related to women-owned, minority-owned, and small business lending substantially differs in relation to other lenders," wrote Morris. "Given the unique characteristics of credit unions and the limits placed on member business loans (MBLs), the CFPB should seek to exempt credit unions from any future rulemaking that compels disclosure of business loan information."

Morris explained the association's concerns regarding the possibility of increased compliance costs and further restricted lending activities for credit unions that might result from this Dodd-Frank Act requirement. Section 1071 of the Dodd-Frank Act would require financial institutions to collect and report information - whether the business is a small business and women- or minority-owned - and give this information to the CFPB using systems similar to those used to collection information for the Home Mortgage Disclosure Act rule. Read more at CREDIT UNION INSIGHT

Small business loans up but slowed by rules, rates. By Joyce M. Rosenberg, Associated Press

Banks lend at near pre-recession levels, but companies wary

NEW YORK - Trying to size up the state of small business lending can prompt the question: Is the glass half-full or half-empty?

Banks and government data point to a recovery in small business loans since the recession, with loan figures nearly back to their 2008 levels. But many company owners say while they're more upbeat about the economy, they're not planning to ask banks for financing.

Some have enough on hand. That's what nearly half of the companies queried said in a survey released in March by the Federal Reserve's regional banks. But 27 percent said they didn't want to take on debt. Some are skittish about borrowing after getting stung by the recession. Interest rates that have been rising, and making some owners think about higher repayment costs, could also be a part of it. And 17 percent didn't apply for financing because they expected to be rejected.

Gregg Ward says he's struggled to get even small lines of credit, $25,000 and under, despite a good credit history, because bankers he's applied to are still so conservative years after the Great Recession.

"They're not easing up," says Ward, owner of an eponymous San Diego-based executive coaching and consulting firm. "It makes it less likely I'm going to expand my business."

So Ward, like many other owners, is trying to figure out other ways to meet some of his goals. He wants to hire a staffer to help him find new business; that may mean dipping into cash reserves.