Congressional Hearings Confirms That States are Doing a Good Job at Regulating Short Term Lending

If you’ve been in micro-lending for any period of time you’re familiar with CRL – Center for Responsible Lending and Veritec, a regulatory service for various state payday loan compliance monitoring.

The Center for Responsible Lending has attacked the payday loan industry since time began. They never fail to twist any facts presented to them nor do they hesitate to distort the truth. And as  far as suggestions to alternatives for payday loans they offer only one, so elegantly stated by Jean Fox (CRL Director of Financial Services) at Rep. Guiterrez’s hearings on the payday loan industry, “Payday loan consumers should simply ask their friends and family for financial help.”

A review of data revealed by Veritec provides ample ammunition for arguing against the propaganda spit out by The CRL. The only problem is that The Center for Responsible Lending has gotten very good at interpreting this data to support their anti-business leanings.

The Center for Responsible Lending distortions have become so ridiculous that it prompted Veritec to issue a White paper analysis refuting the misinterpretations made regarding Veritec’s data.


If you care about the micro-lending industry (payday loans, pawn, check cashing, car title loans…) you have got to educate yourself and be ready to intelligently defend your business.

The following is a press release issued by Veritec originally appearing here:

Following is Veritec’s statement.

We bring this to you because each of us must do our little bit to intelligently defend our industry. You need solid, accurate information.

So here it is…

Congressional Hearings Confirms That States are Doing a Good Job at Regulating Short Term Lending

JACKSONVILLE, Fla., April 8 /PRNewswire/ — A House Financial Institutions and Consumer Credit Subcommittee hearing held April 2, 2009 for H.R. 1214, the Payday Loan Reform Act, included testimony
about the effectiveness of state payday lending regulation. The testimony emphasized that some states have chosen to strictly regulate short term lending, while other states have simply attempted to ban payday loans by implementing limits on fees based on an annual percentage rate.

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“Several states, including Florida and Oklahoma, are effectively protecting consumers,” said Thomas Reinheimer, CEO of Veritec Solutions of Jacksonville, Florida. “Veritec is at the forefront of implementing effective regulatory enforcement solutions for strong consumer protections required by state law. We see first-hand the impact of good regulation in enabling access to short-term credit while protecting consumers from getting trapped in a downward debt-cycle.”

Unfortunately, certain consumer advocacy groups blindly seek to ban availability of short-term credit without full consideration that their actions limit consumer choice. This near sighted approach often results in consumer usage of un-regulated products such as off-shore Internet loans. Reports published by Veritec, based on millions of actual loan transactions, contradict many assertions made by these consumer activists.

“The hearing provided a clear presentation of the product, how it works, the potential abuses, and what has been effective in addressing potential abuses that occur in the industry. State regulatory data based on millions of actual loan transactions in Florida and Oklahoma, two states that have effectively eliminated
multiple loans and rollovers, clearly demonstrates that short-term lending can be regulated effectively,” said Mr. Reinheimer.

Veritec has published detailed white papers and reports about effective regulation of the payday loan industry, available at, that illustrate the following facts:

* Borrowers and lenders are unable to roll-over payday loans in Florida and Oklahoma.
* Over 75 percent of borrowers pay-off their loans within 2 days after the due date.
* Grace periods and repayment plans are available under state law to any eligible borrower who can not  pay off their loans on time.
* Over 25% of borrowers no longer use the product more than one year and a majority of borrowers no longer use the product after 3 years.

A recent press release issued by the Center for Responsible Lending (“CRL”) distorts the truth about consumer protections in Florida and Oklahoma. State law prohibits roll-overs in Florida and actual data from millions of loans conducted by in Florida clearly shows that borrowers do not roll-over their loans. Despite these publicly available facts, CRL continues to disseminate erroneous information. “I simply do not understand why CRL continues to misrepresent the facts,” said Mr. Reinheimer.

“We are concerned that states considering regulation and enforcement of consumer protections may be swayed by misinformation from CRL. Veritec supports effective regulation of short-term lending that provides borrower access to short-term credit products with enforcement of consumer protections. State bans on short-term credit products often have an unintentional consequence of helping unregulated lenders, such as off-shore Internet lenders, by eliminating a consumer’s option to choose a regulated product,” said Mr. Reinheimer. “To better illustrate this, all anyone has to do is to search the Internet for loans available in rate cap states and see that unregulated, unlicensed activity is alive and well.”

Veritec Solutions LLC is a regulatory services company that manages statewide lender compliance programs in eight states with statewide databases and related limits included in their respective payday lending (aka deferred presentment, deferred deposit) statutes. Veritec helps state agencies regulate lenders through the
management of these programs. Veritec’s primary customers are state regulatory agencies; the firm does not supply any goods or services to the payday lending industry.

SOURCE Veritec Solutions LLC
And here is a link to the 15 page White Paper at their web site:

Comment? Question?


HR 1214 Payday Loan Reform Act 2009

I awakened Thursday morning a little depressed. I don’t normally wake up in this condition but I knew a “Subcommittee on Financial Institutions and Consumer Credit” headed by Rep. Guiterrez (D-IL) was scheduled that day; Thursday April 2, 2009..

I was not very hopeful. The Payday Reform Act (H.R. 1214) outlines so-called “solid consumer protections for 23 states that have weak or nonexistent consumer protections from abusive lenders.” H.R. 1214 focuses on fees charged and the so-called “cycle of debt.”

Generally, when beaurocrats and regulators decide to address the payday loan industry it’s bad news. The result is often less consumer choices will be available for solving short-term financial problems and additional restrictions targeting the payday loan industry.

So… it was with a great deal of trepidation that I watched this hearing. I literally had butterflies in my stomach!

The result? Two hours later I felt great! Except for Maxine Waters and Jackie Speers, the members of the committee GET IT! They even responded to Jean Fox of the CRL with disdain! Her inability to present a thoughtful and realistic alternative to our product completely turned them off!

The real star was Ms. Guiterrez, a payday loan customer; someone who HAS ACTUALLY USED PAYDAY LOANS out of necessity. Ms Guiterrez was BRILLIANT! Reasoned and articulate, she did a great job of explaining the plight of a typical payday loan consumer. It was obvious she impressed the members of the “Subcommittee on Financial Institutions and Consumer Credit.”

Rep. Guiterrez, and the other committee members, continually focused on what alternative products exist to fill the void should the payday loan product go away. And the answer each time? SILENCE!

There were several industry representatives present who did a great job as well. We congratulate CFSA for stepping up to the plate and defending our industry vigorously!

We’ll come back to this event in the coming weeks for further analysis. Stay tuned!


Payday Loans, Surveys, Center of Responsible Lending – NOT

Lawrence Myers, over at, has what must be a payday loan April Fools joke. He quotes the founder for The Center of Responsible Lending, Herb Sandler, with the following:

“Our recent flawed research, complete with our worthless methodology, attempts to link payday lending to bankruptcy, closed bank accounts, credit card delinquency and a long list of other financial hardships,” McFib said. “There is really no excuse for us to manipulate the truth in this manner, other than to sway the media, public opinion, and opportunistic politicians into doing our bidding. With nobody able to stop our abuses now, we continue to distort the truth and release bogus “surveys” until we achieve our goal of complete domination over the short-term credit market. We see where lax non-profit organization oversight has led us, and we love it. We should learn a hard-taught lesson, but thankfully, nobody is taking us out to the woodshed where we belong.”

If you’re interested in payday loans, the new legislation recently introduced and a funny yet very sad read, mosey on over to Larry’s Blog. He has plenty of excellent insight in to many facets of the payday loan industry.