CRL Response to Wall Street Journal Editorial (1/31/12) on Payday Lending

Center for Responsible Lending
February 7, 2012

Dear Wall Street Journal: Your editorial, “Bashing Payday Lenders; Obama targets another industry that serves low-income Americans,” is wrong on every point.  Payday lending doesn’t help low-income families; it traps them in a cycle of debt leaving them worse off.

Imagine paying $90 dollars in interest each month if you carried a $300 credit card balance that you couldn’t afford to pay off all at once.  This is essentially how payday loans operate. Just like unfair overdraft fees and other high-cost products, it’s a bad deal.

Brick-and-mortar payday lenders and online lenders operate the same way, using a business model that traps customers in high-cost debt.  CRL research shows that 76% of payday loan volume comes from churned loans—the loan structure makes it impossible for these borrowers to clear a monthly billing cycle without borrowing again. The only difference is that brick-and-mortar payday lenders operate under the guise of the law. A bad product is a bad product. The industry’s “best practices” are just window dressing to hide that fact.

Fighting predatory lending is not a partisan issue.  With wide bipartisan support, voters in states across the country have supported interest rate caps and other safeguards against predatory payday lenders.  Montana voters recently imposed a usury cap, following Ohio and Arizona – these states are hardly bastions of liberal politics.   

Financial reforms didn’t raise the cost of credit, bad lending practices did. To the contrary, reforms have helped restore transparency and competition, and this in turn helps lower the cost of credit and make it more available.  Reining in bad financial products is good for everyone. 

Uriah King
Vice President of State Policy

For more information: Kathleen Day at (202) 349-1871 or; Ginna Green at (510) 379-5513 or;


About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.