paydayloanindustryblog.com

I was at a dance party in Newport Beach, California the other night (Yes, my girlfriend is a dance teacher so there I was) and the subject of what I do for a living came up.

Now, when I’m in the haughty suburbs of Newport Beach my typical response to the question of, what I do for a living is usually, “I’m in the sub-prime financial services industry.” Probably just like you, I’m not in the mood to defend myself for making money with payday loans. And I know after working on the “front lines” or the “counter” as we say, that we really do help a lot of people. However, I still cringe a bit when this subject comes up. Not as much as I used to but I still get the shivers.

So of course, being in Newport Beach on the “left-coast”, there had to be some kind of consumer protectionist with a desire to attack me. (Actually, I really think he was simply jealous because I am a better dancer than he. I swear he was watching me out of the corner of his eye as I did the West Coast Swing.)

Now this guy was not your typical Center for Responsible Lending (CRL) sympathizer! He knew enough of the “facts” to try to give me a hard time.

But, luckily for me, and the rest of us in the payday loan industry, I had the benefit of very recently reading:

“Predatory Reporting” on Payday Lending?
Donald Rieck, July 18, 2008 (updated, July 21)
Do payday loans sink people into inescapable debt, forcing them to pay many times more the original borrowed amount in interest?

Now this IS ONE REALLY WELL WRITTEN and, more importantly, WELL RESEARCHED article on the REAL FACTORS affecting the attackers of our industry. It’s a bit lengthy but you really should check it out in it’s entirety:

http://www.stats.org/stories/2008/how%5fbad%5fpayday%5floans%5fjuly18%5f08.html

A few highlights…

A Factiva search of newspapers across the country shows that there were over five thousand negative payday loan stories in 2007 alone. NO SURPRISE HERE!

A 2007 study by Veritec http://www.veritecs.com/news.htm

(a government contractor that provides program management to state agencies which regulate the payday loan industry) concludes that the Center for Responsible Lending (CRL) attacks on our industry are totally erroneous. After examining payday loan usage in Florida and Oklahoma, Veritec concluded that the data “simply does not support the CRL conclusion about fees paid” and the need to outlaw payday loans.

A consumer using the option of skipping a credit card payment, rather than using a payday loan, triggers an average late payment fee of $35, according to indexcreditcards.com. “Over-the-limit” fees for credit cards average $36 and the consumer’s credit rating is damaged typically causing the credit card company to increase the APR on future uses of the card.

Another method is check kiting http://en.wikipedia.org/wiki/Check_fraud . But NSF fees average $28.23, according to bankrate.com. Moebs Services, an economic research firm, estimates that NSF fees account for 18% OF THE NET OPERTAING INCOMEOF BANKS AND 60% OF CREDIT UNIONS OPERATING INCOME! That is unreal!!

NO WONDER BANKS & CREDIT UNIONS HATE PAYDAY LOANS!

So, when consumers use payday loans to avoid these bank and credit union fees they cremate the net income of banks and credit unions!

Another option to payday loans is for the consumer to purchase “overdraft protection.” However, The Woodstock Institute, a nonprofit group that promotes economic development in lower-income and minority communities, estimated that the APR for bounced check “protection” averages 2400 %!!

Sheila Bair, the current chairman of the board of directors of the Federal Deposit Insurance Corporation (FDIC), during a 2005 speech, stated “the ‘enormous’ fees earned on these programs discourage credit unions and banks from offering payday loans. Since they reap such enormous revenue from overdraft protection and bounced check fees, credit unions and banks have a vested financial interest in limiting consumer options and having payday loans removed from the marketplace.” She warned that customers were “catching on” and turning to payday loans for their “cheaper product.”

Even more astounding, the Center for Responsible Lending (CRL), which has focused their tremendous resources against the payday loan industry, is headed by CRL founder and Self-Help Credit Union CEO Martin Eakes! On March 18, 2008, Forbes.com published an article titled “Subprime’s Mr. Clean: Martin Eakes’ Campaign to Straighten Out Subprime Lending Has Some Wrinkles.” The article makes the point that Eakes’s leadership of a credit union creates a conflict of interest with regard to CRL’s activities. The article quotes noted economist Donald Morgan:

“Who then benefits from payday loan bans? Credit unions, for one, notes Morgan. He says interest rates on overdrafts charged by credit unions and banks can exceed 2,000 percent, dwarfing the high interest rates on payday loans. Credit unions, he adds, have been especially hurt by payday lenders cutting into their overdraft fees.”

Forbes.com notes that in North Carolina where payday loans are outlawed, CRL and Eakes were “instrumental in outlawing payday loans.” Forbes.com also notes that Self-Help assets have jumped from $114 million in 2003 to $292 million in September 2007! CONFLICT OF INTEREST? HELL YES!!!!

Additionally, a study by Morgan and Strain’s evaluated how households fared in Georgia and North Carolina after payday loans were prohibited:

“Compared to households in states where payday lending is permitted, 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. This negative correlation- reduced payday credit supply, increased credit problems- contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced check “protection” sold by credit unions and banks or loans from pawn shops.”

Easing restrictions on payday loan limits actually seem to IMPROVE consumer financial difficulties. Witness Hawaii, where payday loan limits were increased from $300 to $600. Borrowers problems with debt and the Hawaiian rate of bankruptcy fillings actually DECLINED!

And regarding the effect of banning payday loans on the incidences of bounced checks, Morgan and Strain note:

“On average, the Federal Reserve check processing center in Atlanta returned 1.2 million more checks per year after the ban (on payday loans). At $30 per item, depositors paid an extra $36 million per year in bounced check fees after the ban.”

So, it shouldn’t require Sherlock Holmes to figure out just who really hates payday loans and why they fight us so hard in the name of protecting the consumer! It’s never been about the consumer. It’s about the MONEY! You know the old saying, “Follow the Money.”

Do you think that banks and credit unions may even be funding organizations like CRL?

HELL YES!!!!

Do you think the media and the journalists will figure all this out?

Hell No!!!

Oh, and do you think I was able to DESTROY that consumer protectionist guy at the dance?

HELL YES!!!

Please read the full article at:

http://www.stats.org/stories/2008/how%5fbad%5fpayday%5floans%5fjuly18%5f08.html

And please forward our Newsletter to journalists, regulators, legislators and anyone else interested in helping consumers to maintain choice in the financial products they have access to!

The Payday Loan Guys,

The Trihouse Team
Trihouse Payday Loans
702-889-9555
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http://www.PaydayLoanIndustry.com
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http://www.CheckDataSystems.com
http://www.paydayloanlegislation.com
http://www.PaydayLoanIndustryBlog.com

WOW! A movie about a family running a payday loan store!! Who would have thought? This could be real interesting. They’ll never improve on “The PawnBroker” with Rod Steiger. But, what’s next? A reality show about a Check Casher or a Auto Title Loan Lender?

MEDIA RIGHTS CAPITAL AND THE CW NETWORK ANNOUNCE PREMIERE DATES AND CASTING FOR ORIGINAL SUNDAY NIGHT PRIMETIME PROGRAM “EASY MONEY”

July 19, 2008 (Burbank, CA) - Casting and premiere dates were announced today for the new Sunday night line-up on The CW Network, including “In Harm’s Way,” “Surviving Suburbia,” “Valentine” and “Easy Money,” by Dawn Ostroff, President, Entertainment, The CW and Keith Samples, President, Television, Media Rights Capital. “In Harm’s Way,” “Valentine” and “Easy Money” will premiere on Sunday, September 21, with “Surviving Suburbia” scheduled to debut on November 2, timed with the beginning of November sweeps. The four original programs are part of The CW Sunday night primetime programming block produced by Media Rights Capital. Programming for the 5:00-6:30 p.m. timeslots will be announced soon.

“EASY MONEY” - Premiering September 21, 9:00-10:00 p.m.

The cast of “Easy Money,” a new one-hour drama about a family that runs a high interest loan business, includes Emmy Award-winning actress Laurie Metcalf (”Desperate Housewives,” “Roseanne”), Jeff Hephner (”The O.C.”), Judge Reinhold (”Swing Vote,” “The Santa Clause Trilogy”), Nick Searcy (”Rodney”), Jay Ferguson (”Sleeper Cell”), Gary Farmer (”Moose TV”) and Katie Lowes (”The Ghost Whisperer”). Diane Frolov and Andy Schneider (”Northern Exposure,” “The Chris Isaak Show,” “The Sopranos”) serve as Executive Producers for the series, along with producer Brandon Hill.

In “Easy Money,” 28-year-old Morgan Buffkin (Hephner) finds himself in charge of Prestige Payday Loans, his eccentric family’s enormously successful short-term loan business. Any doubts Morgan has about running his family’s business are quickly replaced by dealing with family business: Morgan’s brother Cooper (Ferguson) insists on driving a silver-plated Hummer, his sister Brandy (Lowes) has questionable morals, he suspects that his mother (Metcalfe) and father (Searcy) are not being completely honest with him about his relation to the family, and every so often, part-time detective Barry (Reinhold) drops in. “Easy Money” follows the Buffkin Family in a modern-day Dickensian tale of money and identity.

Following is the Sunday night premiere date schedule:

Sunday, September 21

9:00-10:00 p.m. “EASY MONEY”

About Media Rights Capital:

MRC is a leading independent film, television and digital studio. The company specializes in the creation of premium content, custom building distribution for each of its projects and partnering directly with leading creative talent. 2008 film projects include “Shorts,” written and directed by Robert Rodriguez; “The Box,” written and directed by Richard Kelly and starring Cameron Diaz; “Linha de Passe,” written and directed by Walter Salles; “Foxcatcher,” written and directed by Bennett Miller; “Alfred Hitchcock and the Making of Psycho” and new films by Sacha Baron Cohen and Todd Field. Upcoming television projects include “The Goode Family” created by Mike Judge, John Altschuler and Dave Krinsky for ABC; “Outnumbered” by Larry Levin for Fox Television; “The Life and Times of Tim” created by Steve Dildarian, premiering in June on HBO; “Rita Rocks” for Lifetime Television; “Krod Mandoon” for Comedy Central; and a newly conceived “Name That Tune” in an unmatched cross-network arrangement between MTV, VH-1 and CMT. MRC is producing digital projects including an original series with Raven-Symone, Second City’s QUARANTINE, “Sometimes Daily” with Amanda Congdon and an upcoming animated series with original characters created by Seth MacFarlane.

About The CW:

The CW Network was formed as a joint venture between Warner Bros. Entertainment and CBS Corporation. The CW is America’s fifth broadcast network and the only network targeting women 18-34. The CW offers a six-night, 13-hour primetime lineup that runs Sunday through Friday; a two-hour weekday afternoon block; and a five-hour Saturday morning animation block that delivers a total of 30 hours of programming a week over seven days. The network’s primetime schedule includes such popular series as “America’s Next Top Model,” “Gossip Girl,” “Everybody Hates Chris,” “Smallville,” and upcoming series including “90210″ and “Stylista.”

Arkansas payday loan companies get creative! Nothing new here.

Roughly one-third of the payday loan companies Arkansas  Attorney General Dustin McDaniel ordered to shut down or face the possibility of lawsuits have remained open and restructured their businesses to avoid state regulation, an advocacy group said in a report released Wednesday.

The report by Arkansans Against Abusive Payday Lending reported that 55 of the 156 payday lenders McDaniel targeted with cease-and-desist letters are open.

The Report indicates the lenders have adopted payday loan models in an attempt to circumvent regulations of the Check Cashers Act and the recent crackdown by Attorney General McDaniel.

McDaniel told payday lenders they would face lawsuits if they did not shut down by April 4, and 101 lenders closed in response. The attorney general in May filed lawsuits against 20 payday lenders that he said were violating the state’s constitution by charging high-interest loans.

Arkansans Against Abusive Payday Lending said that the total number of payday lenders operating in Arkansas has dropped from 237 in March to 136 this month. McDaniel’s office has said he focused on companies that offer “deferred presentment loans” where the businesses not only exchange cash for a check but also agree to delay the depositing of the check for a specific time.

The Arkansans Against Abusive Payday Lending organization said that the majority of payday lenders targeted by McDaniel but still open are now operating what they call a “money order” model where payday loans are offered at an interest rate of 8.98 percent annually. The loan is issued in a corporate check or money order. The borrower is asked to endorse the corporate check and it is cashed for an additional fee of 10 percent of the check’s amount.

Fed Chairman Ben Bernanke, testifying before the Senate Banking Committee today, said the best approach for reducing the reliance by consumers for payday loans is more competition.  He further stated that banks and CU’s (credit unions) should be encouraged to develop and offer new products that could compete with payday loan “store-fronts”.

This makes the most sense to us as well. Let the market place develop products and solutions for today’s payday loan, auto title loan, rapid tax refund (RAL’s), customers.  Competition will drive prices down and offer new solutions.

Government should not decide for the market place and remove consumer choice from the equation; EVER!

What do you think?

So ex-president Bill Clinton, “also called on more governors to follow the lead of California Gov. Arnold Schwarzenegger (R) and former Arkansas Gov. Mike Huckabee (R) and reduce childhood obesity by bringing healthier lunches and more exercise to schools. He also urged states to go after pay-day lending operations, whose short-term, high-interest loans hit the poor the hardest, he said. Clinton said there are more check-cashing and payday lending operations in the United States than all the McDonalds and Starbucks worldwide”. http://www.stateline.org/live/details/story?contentId=325309

A little research and we discover Starbucks had 15,012 stores in 44 countries http://en.wikipedia.org/wiki/Starbucks .

And McDonald’s operates over 31,000 restaurants worldwide, employing more than 1.5 million people. http://www.mcdonalds.ca/en/aboutus/faq.aspx

It took about 15 seconds to get the facts!

Even the most optimistic payday loan protectionists estimates there are no more than 22,000. And with recent events in Arkansas, Ohio, Oregon, and NH we are certain there are less.

One more strike against letting the consumer decide!

Ohio’s attorney general has approved proposed language
for use in a petition drive seeking to repeal new payday loan regulations set to become effective in 2009.

Supporters of the payday loan industry required AG Nancy Hardin Rogers to OK the language for petitions seeking to get a referendum for the law’s repeal on the November ballot.

Rogers approved as “fair and truthfu”l the petition drive’s summary of the pertinent portion of the law.

The new law, if it actually becomes effective in 2009, caps annual interest rates at 28%, down from 391%.

Gov. Ted Strickland on June 2 signed the bill that puts the new restrictions into effect. Payday lending businesses point out that the law change would force them to close offices, lay off thousands of employees, and remove another financial choice Ohio residents currently have .

Rather than regulate the payday loan product out of business, if the new law were to take effect, it would force Ohio payday loan consumers to apply for payday loans via the Internet or call centers.

Regulators cannot put an end to demand for payday loans! At best, they simply force consumers to reveal their social security and bank account information to payday loan companies residing in other states or offshore.

Additionally, the state loses the revenue derived from licensing and auditing, employment and sales taxes. It’s ridiculous!! Why not let the market dictate rates and fees by allowing competition to exist? Guess they THINK they know what’s best for ALL of us.

Manitoba Provincial legislation to put a cap on interest rate loans takes
effect this fall. The province has approved the rate upheld by the federal
Criminal Code, to set maximum interest rates for short-term loans.

Manitoba’s Public Utilities Board has ruled that interest rates will be
capped at 17 per cent for loans under $500.

The limits on interest rates charged by payday loan companies will be
determined by the size of the loan.

It allows payday loan operators to charge a certain rate for certain sizes
of loans.

A “payday” loan is anything up to $1,500 dollars on a short-term basis.
However, the Public Utilities Board has said you can charge up to 17 per
cent until you hit one-third of net pay of the loan ($500) then the interest
rate drops to 6 per cent off the total loan.

It was pointed out that 6 per cent on an annualized rate is still 144 per
cent interest that consumers must pay.

The interest rate on at 6 per cent on a two-week loan equals about 144 per
cent a year.

The goal was to strike a balance between protecting consumers and having the
short-term credit product available to consumers.

See http://www.PaydayLoanLegislation.com for more information.

Senate Indian Affairs Committee hearing weighs testimony

WASHINGTON - A hearing of the Senate Indian Affairs Committee on predatory lending dwelt more on payday loans, and came with several cautions as to the difference.

Statistician Patricia Cirillo explained after the hearing that predatory loans - high interest rates and onerous terms, usually to people whose impaired creditworthiness has made it impossible to get better terms - come with every so-called ”risk pool” of the lending industry. The collapse of the national home mortgage lending market, in large part due to predatory loans from once-respected lending institutions to people of good credit standing, is a case in point, she said.

In any case, the conventional understanding is that so-called subprime loans, at interest rates above the prime rate available to the most creditworthy among us, are distinct from predatory lending, with its loan-shark interest rates and other advantage-taking business practices.

A committee spokesman said the hearing treated payday lending as a part of predatory lending, a distinction strongly resisted by Cirillo in written testimony and at the witness table by Jamie Fulmer, director of public affairs for Advance America Cash Advance, a payday lending company.

Fulmer appeared as a representative of the Community Financial Services Association of America, which has member organizations in and near Indian country, and he emphasized that the bad business practices of predatory lenders are simply bad business.

Payday lending is a comparatively new industry, he added, and CFSA best practices in payday lending, combined with reasonable regulation and advances for financial literacy in Indian country, will continue to spread measurable prosperity through communities.

Committee chairman Sen. Byron Dorgan, D-N.D., began the session with reminders that not all payday lenders in Indian country are bad, and additional financial services there are ”good news.”

W. Ron Allen, secretary of the National Congress of American Indians and chairman of the Jamestown S’Klallam Tribe, called for financial literacy, banks, credit unions and community development financial institutions in Indian country, but also cautioned strongly against any kind of draconian new regulation that would drive payday lenders away from reservations. The short-term loans provided by payday lenders are essential to impoverished communities where so many live day to day without a good income cushion against hard times.

Tex G. Hall, past chairman of Three Affiliated Tribes in North Dakota, chairman of the Inter-Tribal Economic Alliance and CEO of the MTE Management private equity firm, went still further in written testimony.

”The fact is, payday loans are for small amounts … usually for two weeks [at 15 percent interest] … Mr. Chairman, you and I both know, banks will not loan such small amounts for short terms, there is simply no profit in it. … [CFSA] members only give loans to consumers who can provide proof of employment or other steady source of income, and proof of an existing checking account. This indicates a reasonable expectation of an individual’s ability to pay. This also disqualifies many Indian people on poor reservations where the unemployment rate is often 60 to 80 percent from taking out a loan that cannot be paid back.”

Eleanor Rogers, a student at Navajo Technical College who attended the meeting but didn’t testify, had what sounded like a good last word afterward. Inflamed over the appearance and practices in a Navajo border town like Gallup, N.M., with its long vistas of payday lending outlets, some of them located in pawn shops, she gave a basic description of the problem with payday loans in her view.

”It’s not a short-term loan. It becomes a long-term loan.” Borrowers get caught up in a cycle of multiple loans a year, always paying out fees and interest on repeated short-term loans. Financial literacy is a solution, she said, but only if it’s basic and to the point: ”Just pay back a bill and learn to budget.”

Cirillo, of Cypress Research Group in Shaker Heights, Ohio, said, however, that what economists call ”economic shock,” basically in this context an emergency requiring cash outlays to address (think of a car radiator springing a leak) hits households nationwide an average of four to six times a year. No comparable Indian-specific number is known, she said, adding that even at four to six times a year, people would need repeated short-term loans.

A March report by First Nations Development Institute in Longmont, Colo., titled ”Borrowing Trouble: Predatory Lending in Native American Communities,” appeared to get short shrift at the hearing, though the committee relied on it for the definition of payday lending as a part of predatory lending. In a review paper submitted to the committee, Cirillo shredded its credibility. She left no major point of the First Nations study unmolested. No one paid her to write her paper, she said.

Once again, the people who know what’s best for all of us have restricted our financial choices. We cannot continue to open payday loan and check cashing stores in Long Beach. So, Long Beach City residents will continue to pay the maximum fees prescribed by law for these services.

During the past several weeks we had noticed a few payday loan stores in Long Beach beginning to offer reduced fees and even “free first time loans”. You can bet these grandfathered locations will soon cease to offer deals like these to Long Beach consumers. Why should they? With less competition they won’t need to.

Less payday loan and check cashing stores will mean fewer jobs, less city taxes, less oversight, fewer choices and more. The city fathers surely don’t think they’ve reduced demand for payday loan and check cashing services do they? They have simply forced more consumers to drive a little farther, perhaps even to a nearby city, or worse, to apply for a payday loan on the Internet.

Long Beach passed an ordinance to restrict the growth of new check cashers and payday lenders in the city.

On July 1, the City Council voted on a six-month moratorium prohibiting the approval of new check cashing and payday lending businesses. The moratorium directly addresses the social and economic impacts these businesses have on the community by stemming their expansion. (Again, they may slow their expansion BUT there remains a HUGE demand for these products!)

The California Reinvestment Coalition and other fair lending advocates (read overly zealous consumer protectionists who THINK they know what’s best for ALL OF US.) across the state are campaigning for local land use ordinances in major California cities, and for a statewide interest rate cap on payday loans. (This will simply force Californians to drive, walk, bus, hike to another state or use the Internet to get their money or cash their check.)

“Payday lenders charge borrowers outrageous interest and fees, which often trap consumers in an inescapable cycle of debt,” said Liana Molina an organizer with the California Reinvestment Coalition. “It’s significant that the City of Long Beach is using their authority to restrict the growth of these businesses.” (Same ol’ BS. Have you ever heard of an independent study documenting complaints by payday loan and check cashing customers complaining about “outrageous interest and fees”?)

The City Council already approved a moratorium on new payday lenders and check cashers in the downtown area, which went into effect April 22. The ordinance approved by the Council 6-3 on July 1 will extend that moratorium citywide, including all redevelopment project areas.

The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 250 nonprofit organizations and public agencies across the State.
SOURCE California Reinvestment Coalition

http://www.calreinvest.org

When will these people decide it is illegal for me to purchase more than 3 Mc’Donalds burgers each week? Or wear a seat belt? Or hands free cell phones? Or I must have auto insurance? Or smoke free restaurants and work places?

Why can’t they just leave it up to me to frequent the businesses and services I want to support? Oh, I forgot! THEY know what’s best for me.

Jer@PaydayLoanIndustry.com

Panic caused by rumors of the Feds attacking payday loan ACH providers began late last week! After MANY frantic faxes, emails and phone calls it appears the companies at risk are all off-shore payday
loan companies who lack Federal Tax ID’s and failed to file US tax returns. Questionable activities also include the potential lack of “proof of ACH authorizations” and an excessively high “ratio of claims”. It appears two ACH processors are involved.

Further information learned today reveals a regulator with the OCC over-stepped their mandate. It seems the regulator took it upon herself to attack the “single-choice-of-law” payday loan model and offshore operators. No cease and desist orders were formally issued to any banks or ACH processors.

Final disposition is premature at this time but our CONSERVATIVE sources advise payday loan internet providers to secure licenses in states and provinces having “safe-harbor” legislation, max out at 3
rollovers, and ALWAYS secure a fully documented “Proof of ACH Authorization” from your customer.

On the other hand, several compliance consultants we contacted feel the “choice-of-law” model is not at risk!

Bottom line: it’s the payday loan product in conjunction with the Internet. Think “wild, wild, West”!!!!