CRC Statement on Cordray Confirmation

On July 16, 2013, the U.S Senate confirmed Richard Cordray’s nomination to serve as the director of the Consumer Financial Protection Bureau (CFPB). In response, the Consumer Rights Coalition issued the following statement:

“The Consumer Rights Coalition, which is made up of more than 200,000 consumers of alternative loan products, looks forward to working with Director Richard Cordray and his team at the Consumer Financial Protection Bureau (CFPB).  CRC supports the CFPB’s mission to deliver strong consumer protections while preserving and expanding credit options.  We will work with the CFPB and Director Cordray to address issues that are important to our members, such as improving financial education, offering protection from bad actors, ensuring clarity for bank and non-bank products, and most importantly, protecting and expanding innovative options for consumers in accessing all forms of credit. Access to credit has been, and continues to be, an important issue affecting millions of American families and we will work with the CFPB to ensure that alternative credit options, including short-term loans, remain viable and available for our members and other families just like them.”

Why Many People Go Without a Bank Account

Newser, November 26, 2012; by Neal Colgrass

Nearly a third of Americans are “underbanked,” meaning they lack access to a full array banking services—but why? The question is particularly pressing when you consider that cashing checks and paying bills without a bank account can cost an extra $380 a year. What’s more, low-income, unemployed, and minority Americans are more likely than other groups to have no bank account. So why pay more for financial services when a $10-a-month account would do the trick?

For four reasons, according to Time

Buzzwords Do Not Benefit the Unbanked

American Banker, November 12, 2012; by Jim Wells

The release of the Federal Deposit Insurance Corp.’s 2011 National Survey of Unbanked and Underbanked Households triggered a new wave of discussions about the financial needs of consumers without bank accounts. Sadly, the discussions are laden with buzzwords that affluent people use to describe how less-affluent people should conduct their financial affairs.

But, as the survey shows increases in both the numbers of consumers without bank accounts and those with partial banking relationships, it may be time to stop using inaccurate and biased terms that inhibit understanding the real needs of consumers for whom the banking system is increasingly irrelevant.

The argument in favor of payday lending

Marketplace, November 9, 2012; by Tom Lehman

Payday lending has become common in the U.S., but it’s attracted harsh criticism from many. And it’s been banned or regulated out of existence in some states. But banning payday lending actually does more harm than good by restricting credit options for households with no other recourse for loans.

Critics object that fees for payday loans, typically $25 per transaction, are excessive. And sure if you expressed that $25 as an annualized interest rate for a two-week $200 loan, the interest rate would be in the triple digits. But the fee is the risk premium the lender charges to provide loans to people who usually have poor credit. And borrowers don’t look at the fee as an interest rate any way. They recognize that $25 is much less than bank overdraft charges, late fees and disconnect penalties from utilities.

The Unintended Consequences of Cracking Down on Payday Lenders

Reason Magazine, October 24, 2012;

Four years ago, Virginia lawmakers cracked down on payday lending. They limited borrowers to one payday loan at a time, and doubled the length of time they had to pay the money back. It worked. Payday loans plunged more than 80 percent. A few lenders left the state completely.t it also didn’t work.  The reforms created a vacuum being filled by a new form of short-term lending: car-title loans.

But it also didn’t work.  The reforms created a vacuum being filled by a new form of short-term lending: car-title loans.

Don’t make payday loans a scapegoat

Reuters, October 10, 2012; by Jamie Fulmer

Credit access remains a challenge for millions of Americans, leaving them with limited options to meet their financial obligations. Payday loans are just one form of short-term, small-dollar credit that bridges this gap, ensuring access to cost-competitive, reliable and transparent credit when faced with periodic financial challenges. Unfortunately, this service is often misunderstood and misrepresented, as demonstrated by a recent “Great Debate” piece, “Is the payday loan business on the ropes?” (September 21, 2012).

Fifteen years ago, the payday lending industry emerged because of consumers’ need and demand for access to affordable small-dollar credit – credit that wasn’t readily available to many consumers or offered by many traditional financial institutions. Today, according to the Consumer Federation of America, nearly 40 percent of Americans live paycheck to paycheck, with less than a third feeling financially comfortable. The short-term-credit landscape has evolved over the years, as exemplified by the overwhelming popularity and rising cost of competing products like overdraft programs and bank deposit advances.

OLA Statement on Consumer Credit Access, Innovation and Modernization Act

Statement by Lisa McGreevy, President & CEO, Online Lenders Alliance

Lenders are not looking to “escape federal regulation.” In fact, we are one of the few industries asking for it.

The bipartisan Consumer Credit Access, Innovation and Modernization Act will establish a federal charter that clearly defines a set of transparent national standards, allowing lenders to provide more credit alternatives with lower costs as well as flexible payback periods and loan amounts.

Nonbanks operating under a federal charter will have to comply with all federal laws and regulations applicable to other bank lenders, including the consumer protection authority of the Consumer Financial Protection Bureau. We are asking every lawmaker to seriously consider this legislation so that millions of Americans will have access to the kinds of innovative financial options that they’re demanding.

1 in 10 in Ohio without checking, savings accounts

Dayton Daily News, September 21, 2012; by Cornelius Frolik

Almost one in 10 households in Ohio do not have a checking or savings account, and consumers are increasingly relying on some fee-heavy alternative financial services, according to a new federal study and interviews with experts.

More U.S. consumers are shunning banks and other insured depositories, and these people are more likely to use pawn loans, check-cashing services, rent-to-own stores and non-bank money orders and remittances, according to a survey released this month by the Federal Deposit Insurance Corp. Even people who participate in the standard banking system are more regularly using non-traditional financial services, including payday loans.

Give Nonbanks Credit – and More Power to Fill Lending Void

American Banker, September 19, 2012; by Lisa McGreevy

Last week the Federal Deposit Insurance Corp. confirmed what we, in the short-term lending industry, have been saying all along: Since the global financial crisis, consumers have increasingly relied on nonbanks to manage their finances.

More than one in four households – 28.3% – are either unbanked or underbanked, and conduct some or all of their financial transactions outside the mainstream banking system, according to the results of the FDIC’s 2011 National Survey of Unbanked and Underbanked Households.

To be clear, that’s nearly 12 million households that do not use banks and another 24 million households that have a bank account but also use a nonbank financial service, such as prepaid debit cards and short-term loans.

The Great Recession has truly changed today’s economic landscape in ways we are only beginning to discover.

Proponents of minimum wage, payday loan measures give up fight to get them on November ballot

St. Louis Post-Dispatch, September 3, 2012

Proponents of measures to raise the minimum wage and limit payday loans today announced they have given up their challenge to get them on the November ballot.

Last month Missouri Secretary of State Robin Carnahan rejected the two petitions because she said they fell short of the required number of valid signatures of registered voters.

Sean Soendker Nicholson, a spokesman for the two groups — Give Missourians a Raise and Missourians for Responsible Lending — said earlier they believed that a significant number of signatures were improperly invalidated by election officials in St. Louis. He said they would examine each of those signatures.

But on Monday, Nicholson said they had decided to drop their efforts for this round.

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