Letter | Sarah Longwell
October 21, 2009 by afp
Filed under *Blogs-Commentary
Following restrictions that limit short-term payday lending access for borrowers, many cash-strapped Virginians are left wondering where to turn (“Shannon releases plan to protect consumers on payday lending,” Oct. 16 AFP). As payday lenders close their doors, their former customers are forced to resort to more expensive alternatives to make ends meet.
A New York Times Magazine article last year highlighted the difficulty of accessing consumer credit facing many Americans. It took a balanced look at the services offered by short-term payday lenders and found they are a valuable financial service because they offer easy-to-understand conditions with “no surprises, no hidden fees,” unlike many banks.
On the heels of the Times article came a Dartmouth College study looking at a 2007 payday lending ban in Oregon. That study concluded that banning financial options ended up hurting Oregon borrowers, and forced them to turn to inferior substitutes like bounced checks and overdraft fees.
Sarah Longwell is the director of communications for the Washington, D.C.,-based Center for Consumer Freedom.
Tracy on Wed, 21st Oct 2009 5:27 pm
Don’t believe anything the deceptively named Center for Consumer Freedom says.
Google them, learn about them, avoid them.
Glass Houses on Wed, 21st Oct 2009 5:30 pm
Don’t believe anything Tracy Habenicht says. Read her blog, absorb her nonsense, avoid her.
chrisgraham on Wed, 21st Oct 2009 5:49 pm
It doesn’t make much sleuthing to figure out the CCF’s biases. It’s a Rick Berman front group.
You could call them “deceptively named,” “cleverly named,” whatever. It’s an industry shill. It has nothing to do with looking out for the interests of consumers.
Donkey Kong, P.I. on Wed, 21st Oct 2009 10:41 pm
What’s a Rick Berman front group? What does that mean?
If the group has good information, I don’t care which Star Trek producer runs it. (Are there any Gene Roddenberry front groups?)
Seriously. It’s like radio: Judge the reporting, not the person who holds the broadcast license.
chrisgraham on Thu, 22nd Oct 2009 12:30 am
Rick Berman – PR guru who puts together groups with important-sounding names (e.g. Center for Consumer Freedom) that by their names sound like populist-type organizations but are in fact industry-funded shills.
As such, they do not have “good information,” unless by “good information” you mean “information cherrypicked by an industry sector to make it look like something it is not.”
Judge the reporting, indeed.
Ryan458 on Thu, 22nd Oct 2009 9:05 am
Chris seems to know a lot about this. What’s your interests? Who are you shilling for?
This letter by the Center for Consumer Freedom is not much opinion. It’s pointing out research by The New York Times and Dartmouth College. How does that not seem fair?
chrisgraham on Thu, 22nd Oct 2009 9:34 am
Looks like we got astroturfed on this. Typing “New York Times Magazine” and “payday lending” into the Googler, I found this from a letter to the editor of the Washington Times, published June 25, 2009:
- An article in the New York Times Magazine last year highlighted the difficulty for many Americans of accessing consumer credit. It took a balanced look at the services offered by short-term payday lenders and found them to be a valuable financial service because they offer easy-to-understand conditions with “no surprises, no hidden fees,” unlike many banks.
On the heels of the Times’ article came a Dartmouth College study looking at a 2007 payday lending ban in Oregon. That study concluded that banning financial options ended up hurting Oregon borrowers and forced them to turn to inferior substitutes like bounced checks and overdraft fees.
Adults are best served when they can choose among many competing financial options.
SAMANTHA O’NEIL
Center for Consumer Freedom
Washington
Link – http://bit.ly/23h5Xm.
And then this from a letter published in the Springfield News Leader on Dec. 4, 2008:
- Two weeks ago, an article in the New York Times Magazine highlighted the difficulty of accessing consumer credit facing many Americans.
The article took a balanced look at the services offered by short-term payday lenders, finding that payday loans are a valuable financial tool since they offer easy-to-understand conditions, with “no surprises, no hidden fees,” (unlike many banks, which are offering these same kinds of loans but without being demonized by media and political elites).
On the heels of the Times article came a Dartmouth College study looking at a 2007 payday lending ban in Oregon. They concluded that banning financial options ended up hurting Oregon borrowers, and forced them to turn to inferior substitutes like bounced checks. Borrowers are best served when they have more choices to pick from.
Tim Miller Center for Consumer Freedom, Washington, D.C.
Link – http://bit.ly/1pshPI.
It took some searching, but I finally found a link to the article in the NYT Magazine. Link – http://bit.ly/12zM6J.
It’s good reading. It’s also long. Scan it, and you might get the same sense that I do. It did give a balanced look at payday lenders in the context of banking services for low-income Americans available in the traditional banking and credit industries. And the final analysis is – payday lenders, banks and credit companies all fail to adequately serve that market.
The Dartmouth study appears to be legit. Link – http://bit.ly/1j7F58. It also gives a balanced view toward payday lenders in the context of the overall banking and credit market.
The bipartisan push to restrict payday lenders to a 36 percent APR is one we have long championed here at the AFP. That push is what we are shilling for.
Ryan458 on Thu, 22nd Oct 2009 10:30 am
What’s the AFP and it’s purpose? Do you have something that adequately serves the market for low-income Americans?
chrisgraham on Thu, 22nd Oct 2009 10:36 am
The AFP is a locally-owned news source based in Waynesboro, Va., that serves the Greater Augusta media market (Waynesboro, Staunton and Augusta County).
Its purpose is to inform, educate and instill vigorous and ethical debate on the issues of the day affecting our readers.
The AFP is not a bank, credit union, credit-card company or other kind of financial institution. It is not owned by any such institution.
Curious – what is Ryan458’s purpose? The Ryan458 name popped up in a Google search this morning commenting elsewhere on the payday-lending issue. That’s why I ask.
Ryan458 on Thu, 22nd Oct 2009 10:36 am
Never mind … Stupid me. The Augusta Free Press. Gotcha. But what are your solutions to fixing the problem, Mr. Graham. That Dartmouth report said cutting payday lending leads to people using bad subsitutes.
Ryan458 on Thu, 22nd Oct 2009 10:40 am
I am in the financial industry with specific interest in payday lending issues. I make no secret of that. It’s an interesting time for all financial sectors.
I do applaud you Mr. Graham for publishing the letter by the Consumer Freedom group even though you clearly oppose their view.
I would really be interested in hearing your view on how to best adequately serve the short-term credit market. I really don’t think the 36 percent rate you mentioned works. That pretty much kills all short term credit, as the Dartmouth suggests.
chrisgraham on Thu, 22nd Oct 2009 10:58 am
The 36 percent rate does work. It’s the standard in place for the rest of the lending industry. Payday lenders get a special dispensation to charge APR above that rate.
I’m not suggesting legislation killing the payday-lending industry. What I’m suggesting is a level playing field for lenders that in itself protects low-income consumers from having to pay much higher rates of interest for short-term loans than all other blocs of consumers have to pay for their lending needs.
The payday-lending industry dresses up what it does as that it’s providing a service. I would suggest that it needs to figure out a way to provide the service using the same interest-rate structure that everybody else has to offer.
Ryan458 on Thu, 22nd Oct 2009 11:15 am
Actually, a 36 percent cap would kill the payday lending industry. You are using an annual percentage rate on a loan that is typically only for two weeks. A payday lender could only charge $1.38 per $100 borrowed at the rate limit you speak of. It costs way more than that for the loan company to do business.
Here is a report on the cost of doing business in the short-term, unsecured market: http://www.reuters.com/article/pressRelease/idUS106466+13-Oct-2009+PRN20091013
If you can figure out a way to offer a two week loan, whether its payday lending or some other way, at a 36 percent APR, then you have done something amazing. Credit unions sometimes offer short term loans with much smaller APR, but they are usually backed up by other loan fees and membership charges.
Also, when you use that APR system on fees and short-term loans, it balloons the figures. Consider the FDIC reports that bank overdraft can exceed 3,000 percent APR in some cases. http://www.fdic.gov/bank/analytical/overdraft/
Thank you for your constructive debate and offering this forum.
Jay Speer on Fri, 23rd Oct 2009 4:01 pm
As usual the predatory lenders talk about the services they provide and how the truth in lending laws don’t apply to them. Predatory lenders do not provide a service–they are a scam. Why do they all say things like: no credit check!, bad credit-no problem!, first loan free!, fast cash in 15 minutes!, etc, etc? Because the real money is made on those that get trapped and can’t pay it back. Instead they pay and pay while they sink deeper into debt. A real loan is when the creditor takes a look at the borrower’s financial condition and decides that a loan can safely be made, that the loan will be paid successfully and it will be mutually beneficial. That doesn’t even remotely resemble a payday, car title or other predatory “loan”.
Carmine on Thu, 12th Nov 2009 6:25 pm
Still wondering about the Gene Roddenberry front group
Make it so…