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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- Springing the Debt Trap-Exec Summary
December 13, 2007Executive summary of Springing the Debt Trap - outlines what reforms states have tried, documents that none have worked except for the 36% rate cap.
- CRL Critique of “Payday Holiday: How Households Fare After Payday Credit Bans” by Donald P. Morgan and Michael R. Strain
December 10, 2007A working paper by a staffer at the Fed Bank of NY is fundamentally flawed, offers no valid information, and is being used to justify policy that keeps low-wealth borrowers trapped in income-draining payday loans. The paper is not a Federal Reserve Bank report as a payday industry press release implies. Our critique exposes the fatal errors in the paper's methodology.
- The Payment Plan Smokescreen
June 4, 2007Facing increasing scrutiny of the problems caused by payday lending, the industry trade group recently announced a new public relations campaign that claims to address the problem of loan flipping by requiring its lenders to offer borrowers an extended payment plan. However, this plan will not give borrowers a viable option for escaping the debt trap, and a description of the guidelines suggests lenders will offer the plan to borrowers in trouble only once per year despite the fact that the typical borrower has nine loans per year.
- Comment: To Department of Defense on Military Lending Act
February 8, 2007Comments on Military Lending Act submitted to Department of Defense by Consumer Coalition on Feb. 5, 2007.
- Small Loan CRA Comment
February 2, 2007CRL Comment to the Federal Deposit Insurance Corporation on its proposed guidelines for affordable small-dollar loans.
