Research & Analysis
The payday lending industry frequently supports what they call reform of their own industry in state legislative battles, because they know that most of the measures in debate will not slow the rate at which they can make repeat payday loans to the same borrower. Our report, Phantom Demand, shows how the industry depends on “churned” borrowers, those who have to take a new loan before their next payday, for three quarters of their business.
In public, payday lenders say their loans are for infrequent use. In private, they say things like this: "The theory in the business is you've got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that's really where the profitability is." (Dan Feehan, CEO of Cash America, remarks made at the Jeffries Financial Services Conference, 6-20-07)
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- Triple-Digit Danger: Bank Payday Lending Persists
March 21, 2013
Banks making payday loans continue to trap customers in a cycle of debt, according to a CRL study, "Triple-Digit Danger: Bank Payday Lending Persists." Banks pitch payday loans as short-term borrowing that allows customers to deal with a financial emergency, repay the loan, and move on. In fact, this new study provides further evidence that these triple-digit interest rate loans, averaging from 225% to 300% APR, trap borrowers in a long-term cycle of repeat loans.
- Renewed Call for Federal Action Against Bank Payday Loans
March 13, 2013
Federal regulators should take immediate action to stop unaffordable, high-cost payday lending by banks. That is the key message from more than 260 groups and individuals in a letter to the heads of the Federal Reserve Board, the FDIC, the OCC and the CFPB. This is a follow-up letter from the same request that was submitted in a similar letter the previous year. The groups say, “We are concerned that a year has passed without decisive regulatory action, so we write to renew our call.”
- How Payday Lending by Banks Violates Safety & Soundness Standards
February 28, 2013
Banks that do payday lending (a.k.a. "Direct Deposit Advances") are engaging in risky behavior. This legal brief offers legal precedents and shows why banking regulators responsible for monitoring banks' safety and soundness should not allow payday lending by depository institutions.
- New York Times Article on Banks Aiding Payday Loans: There's Even More to the Story
February 26, 2013
On February 23, the New York Times published an article describing how some banks enable Internet payday lending. In this brief, CRL provides additional legal context to supplement that article. Bottom line: We need to continue passing state laws that provide strong enforcement tools, and federal regulators need to use their full authority to stop predatory payday loans.
- Reforming the Debt Trap in California
January 31, 2013
For California families living paycheck to paycheck, the high price of a payday loan and the fact that it must be paid off in one lump sum two short weeks later virtually ensures that cash-strapped borrowers will be unable to meet their basic expenses and pay off their loan with their next paycheck.
- U.S. Senators ask Regulators to Stop Bank Payday Lending
January 7, 2013
Five U.S. Senators have asked the OCC, the FDIC and the Federal Reserve to stop the banks under their respective jurisdictions from making predatory payday loans. At least four big banks have started making the triple-digit interest loans, which are virtually identical to the predatory payday loans that trap borrowers in long-term, high-cost harmful debt.
- CRL Comments on Proposed Rules for NCUA Payday Alternatives Loan Program
November 30, 2012
CRL urges the NCUA to structure their Payday Alternatives Loan (PAL) program to reflect the broad range of alternatives, to prevent the program from operating like a series of high-cost payday loans and to prevent credit unions from engaging in payday lending outside of the PAL program.
- CRL and NCLC Comments on Wells Fargo Payday Lending and CRA Examination
November 29, 2012
Wells Fargo's direct engagement in payday lending should have a significant negative impact on their upcoming Community Reinvestment Act evaluation.
- H.R. 6139: Payday Lender Carve-out Will Undermine Consumer Financial Protection Bureau and States
August 27, 2012
Carve-outs for payday lenders will undermine state protections and CFPB.
- CRL's Testimony: A National Payday Charter Is A Bad Idea
July 24, 2012
Testimony of Kenneth W. Edwards Vice President of Federal Affairs, Center for Responsible Lending, before the House of Representatives Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit in regards to hearing on Examining Consumer Credit Access Concerns.