I was at a dance party in Newport Beach, California the other night (Yes, my girlfriend was 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 recently reading:

“Predatory Reporting” on Payday Lending?
Donald Rieck,
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:

A few highlights…

A Factiva search of newspapers across the country shows that there were over five thousand negative payday loan stories last year


A study by Veritec http://www.veritecs.com (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!!


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 theAPR for bounced check “protection” averages 2400%.

Sheila Bair, while chairman of the board of directors of the Federal Deposit Insurance Corporation (FDIC), during a 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! 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 10X from $114 million in 2003.


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?


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?


Please read the full article at:


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
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