Payday Lending News
The latest news on payday loans and the payday lending industry from the Center for Responsible Lending.
- Payday Loan Limits Advance
Delaware News Journal 02 May 2012
Legislation to regulate payday lending in Delaware passed the state House on May 1 and is moving to the Senate, where it has bipartisan backing. If passed, the new law would limit the number of short-term, high-interest loans a borrower can obtain in a 12-month period to five transactions of up to $1,000 each. The proposal also would establish a database in the Banking Commissioner's Office to track the number of payday loans and how they are repaid. Lead sponsor Rep. Helene Keeley (D-Wilmington South) and other House Democrats have tried unsuccessfully to pass a payday lending reform bill for about 12 years. Kent County Republican Sen. Colin Bonini, a co-sponsor of HB 289, said the bill has a good chance in the Senate.
- Santa Clara County Supervisors Ban New Payday Loan Shops
Marin Independent Journal (CA) 01 May 2012
On May 1, supervisors in California's Santa Clara County unanimously approved a ban on new payday loan shops in unincorporated areas. The move came after numerous consumer advocacy groups and the public decried the industry for charging excessive fees and trapping low-income and minority borrowers in a nasty spiral of debt. While the city has just one payday lender on unincorporated land, the ban will remain in place until the county's permanent ordinance takes effect in June. The council is expected to consider ordinances for the industry at an upcoming meeting.
- Keep Out Payday Lenders: Pa. Should Not Let Them Prey on Our Most Vulnerable Citizens
Pittsburgh Post-Gazette 30 Apr 2012
Under a new bill being introduced in the Pennsylvania Legislature, payday lenders would be able to obtain an exception to the state's Consumer Discount Company Act, allowing previously banned short-term lenders to return to the commonwealth. House Bill 2191 argues that to ensure that consumers do not borrow money from online payday lenders from different states, they should borrow from in-state, regulated lenders. The bill is being touted as a "consumer protection" measure. Industry lobbyists claim that active military families would have special protection, even though federal laws already protect military families from nefarious payday lending activities. While the interest on the proposed bill would be capped at 28 percent, the excessive fees would likely add up to hundreds of percentage points. The bill claims to limit roll-over loans. However, it allows borrowers to take out new loans the very next day. Despite the industry's best efforts, it is clear that the four components that define payday and predatory lending would remain intact: exorbitant rates, short payback periods, balloon payments, and automatic transfers.
- Profits Are the Reason for Fees, Not Risk or Costs
New York Times 29 Apr 2012
Consumer advocates have been warning American consumers to avoid check cashers and payday lenders by placing their money in a bank. However, they are changing their tune as some banks have become just as bad. While overdraft fees have been a problem for a while, now some banks are also making account advances, which are very similar to payday loans. The short-term loans often come with triple-digit annual percentage rates and the ability for the bank to repay itself by taking money out of the consumers' bank account. The trend of banks offering such short-term loans is spreading, leaving vulnerable members of society such as working families and the elderly to pay the price. While the banks claim the fees are due to the risk they must take to lend to consumers with poor or no credit, the loans are incredibly profitable, allowing banks to reap billions in profits every year.
- San Jose Planning Commission Approves Payday Lending Curbs
Santa Cruz Sentinel 26 Apr 2012
In California, the San Jose Planning Commission tightened its proposed restrictions on payday lenders after hearing two hours of public testimony. The proposal will be considered on May 15 by city councilors. It calls for a minimum one-quarter-mile distance between payday lending establishments, an increase from the 500-foot restriction originally proposed. Also under the changed proposals, no new payday businesses would be allowed into low-income census tracks. City staff will provide council members with information on how to pursue a cap on the number of payday lenders. Across the state, an increasing number of cities and counties are trying to place restrictions on payday lenders. San Jose currently has 38 payday lending stores.
- Chasing Fees, Banks Court Low-Income Customers
New York Times 26 Apr 2012
Large U.S. banks increasingly are striving to land low-income customers with alternative products that can bear high fees -- including prepaid cards, check-cashing services, and short-term emergency loans -- partly because such products are largely excluded from recent financial regulations. Kimberly Gartner of the Center for Financial Services Innovation says unbanked ...
- City Council Votes to Restrict Payday Lender Growth
Your News Now 26 Apr 2012
City councilors in Austin, Texas, have approved legislation to limit where payday lenders can open a business. Short-term loan outlets will not be permitted to open within 1,000 feet of another similar business or within 200 feet of an interstate. The decision came after a coalition of Austin faith leaders voiced its support, due to congregants suffering from high interest rates. The Austin Catholic Diocese said about $1 million in charity has gone to Texans who owe a debt to payday lenders.
- San Jose and Santa Clara County City Leaders Push for Curbs on Payday Lending
Santa Cruz Sentinel 24 Apr 2012
In California, South Bay officials are looking to rein in payday lending. This week, San Jose planners will consider a proposal to bar payday lenders from establishing their businesses in low-income neighborhoods. Next week, Santa Clara County supervisors will decide whether to make permanent a temporary freeze on all new payday lending stores in unincorporated areas. Although many states and the U.S. military are eliminating or restricting payday lending, the California Legislature has allowed the industry to grow. The number of payday storefronts has declined in the state in recent years, but the number of payday loans swelled from 10 million to 12 million between 2006 and 2010 and the number of customers increased from 1.4 million to 1.6 million. Many local communities are trying to amend land-use and zoning laws to make it more difficult for payday loan businesses to set up stores. In San Jose, city leaders are considering measures just short of a total ban. The current proposal stipulates that new payday business applicants would be blocked from moving into low-income neighborhoods but could open elsewhere in the city, staying 500 feet from other payday lending establishments. However, Ginna Green, spokeswoman for the Center for Responsible Lending, argued that the city already has 38 payday shops and that officials should impose stricter measures.
- Credit Union Short-Term Loans a Payday Lending Role Model: CUNA
Credit Union Times 24 Apr 2012
The credit union short-term lending model is in line with the Consumer Financial Protection Bureau’s mission of protecting consumers from predatory payday lenders, according to Credit Union National Association (CUNA) assistant general counsel Luke Martone. CUNA presented the position to CFPB as a response to the agency’s January field hearing on payday lending in Alabama. CUNA considers the National Credit Union Administration's Short-Term, Small Amount Loan program a template for responsible payday lending. Under the initiative, credit unions are restricted to principal amounts between $200 and $1,000, six-month maximum terms, application fees of no more than $20, and a restriction against rolling over the loan. State-chartered credit unions are not eligible for the program, though some offer similar programs.
- Payday Lenders Up Their Contributions to Candidates
Washington Post 19 Apr 2012
Battered by negative press and anticipating further scrutiny from the Consumer Financial Protection Bureau (CFPB), the payday loan industry is spending more money on lobbying and political candidates this election cycle. According to the group Citizens for Responsibility and Ethics in Washington (CREW), 11 big payday lenders and the industry's two trade associations hiked their spending on lobbying to $4.5 million last year from $730,000 in 2005. One of the trade groups, the Financial Service Centers of America, relocated its headquarters to Washington in 2011, indicating a growing focus on federal regulation. The top three political recipients of industry money, meanwhile, also are vocal critics of the CFPB: Rep. Jeb Hensarling (R-Texas), chairman of the House Republican Conference; Sen. Richard Shelby (R-Ala.), his party's top-ranked member on the Senate Committee on Banking, Housing, and Urban Affairs; and Rep. Spencer Bachus (R-Ala.), GOP chairman of the House Financial Services Committee. In 2010, the three top recipients of industry money were Democrats, who controlled the House at the time.
- Bill Could Allow Payday Lenders Back Into Pa.
Pittsburgh Post-Gazette 18 Apr 2012
A bill introduced in the Pennsylvania House of Representatives would make it legal for out-of-state payday lenders to set up operations in the commonwealth. HB 2191 was introduced by Rep. Chris Ross (R-Chester) and now has the bipartisan support of more than 50 House co-sponsors. Although it does incorporate some consumer protections, the measure essentially would sanction a form of high-interest lending not permitted under current state law. Diane Standaert, legislative counsel for the Center for Responsible Lending, is visiting Pennsylvania to meet with community groups to draw attention to the bill and the risks of trapping low-income consumers in a cycle of high-interest debt. Ross said in a memo that the bill will include "the strongest consumer protections available in other states that regulate the practice." These include limits on loan size, restrictions on fees and interest, upfront disclosures, and limits on the ability to "roll over" loans. Interest rates would be limited to 28 percent on payday loans, but the bill also allows for an origination fee of 10 percent of the principal amount loaned and a $15 "verification fee" on each loan. Standaert said that, for a $300 payday loan due in full in two weeks, that would be the equivalent of an annualized rate of 419 percent. About eight legislators have recently withdrawn their sponsorship of the measure.
- Advocates Say U.S. Bank, Wells Fargo Loans Prey on Low-Income Borrowers
Minnesota Public Radio 17 Apr 2012
US Bank and Wells Fargo target low-income customers by charging lofty fees on short-term loans, according to a report by Minnesotans for a Fair Economy. The fees, the group claims, are equal to or even higher than those from traditional payday lenders. Minnesotans for a Fair Economy has asked Wells Fargo and US Bank to discontinue the loans. Currently, customers at US Bank and Wells Fargo can obtain one of these loans if they have a bank account in good standing and receive paychecks, Social Security checks, or other income via direct deposit. Customers can request up to $500 in a cash advance -- which the banks will deduct, plus fees, from the next direct deposit. US Bank charges $2 for every $20 borrowed, a 10-percent fee; while Wells Fargo charges $1.50 for every $20. A US Bank customer would pay $10 in fees for a $100 cash advance. If the loan is paid back in 10 days, the fees equal a 365 percent annual interest rate, the report calculates. A 2011 report by the Center for Responsible Lending found that customers who rely on payday loans are in debt for an average 175 days a year. The banks offer certain limits on these loans; but some consumer advocates say these are ineffective and have called on federal regulators to ban bank payday loans. Banks are not required to follow state regulations that restrict traditional payday lenders.
- Report Rips Banks on 'Payday' Loans
Minneapolis Star Tribune 17 Apr 2012
Besides storefront and Internet payday lenders, four major U.S. banks also participate in the fast-cash industry, charging interest rates up to 365 percent, alleges a new report by Minnesotans for a Fair Economy. The banks -- Wells Fargo, Fifth Third, Regions, and U.S. Bank -- sometimes charge even higher fees and interest rates for emergency loans than payday lenders, according to the report, but they use their charters help them avoid the regulation that governs the payday sector. They also have become more aggressive in marketing their products, says Uriah King of the Center for Responsible Lending. Representatives from Wells Fargo and U.S. Bank say the banks do not offer payday lending but do have services called "checking account advances" or "direct deposit advances," available only to people who have checking accounts with them and make regular direct deposits. They claim to charge straightforward fees for these loans and do not calculate an annual percentage rate (APR) on interest. According to Minnesotans for a Fair Economy, a $500 advance repaid over a typical 10-day term would cost $50 at U.S. Bank, the equivalent of an APR of 365 percent, and would cost $37.50 at Wells Fargo, amounting to an APR of 274 percent. State law caps the fees that can be charged on payday loans, depending on the amount. For loans between $350 and $1,000, the limit is 33 percent annual interest plus a $25 administrative fee. Minnesota Attorney General Lori Swanson already has sued eight non-bank Internet payday lenders for charging unlawfully high annual interest rates of up to 782 percent.
- Los Altos Moves Against Pay Day Loan Operators
Los Altos Patch 13 Apr 2012
The Los Altos, Calif., city council voted unanimously on April 10 to impose an "urgency" ordinance that prevents payday lending and check cashing businesses from opening up in the city for a period of 45 days. There are no businesses of that type currently in Los Altos, nor any requests for new business licenses for payday lenders. However, speakers told the council that a tide of payday lending companies is flowing into California to take advantage of the state's most financially vulnerable. The average payday borrower takes out 10 loans annually -- largely due to the triple-digit loan rates, which set up a cycle in which borrowers who cannot repay a loan before the next payday must take out another loan to cover the first. City staff will compose legislation in the next 45 days and begin to send it through the approval process.
- East Bay Firm Accused of Illegal Debt Collection Shut Down
Inside Bay Area 11 Apr 2012
A federal court has shuttered, at least for now, a debt collection agency that had callers pose as police officers in order to scare consumers into paying back more than $5 million in payday loans that they had never taken out or had already repaid. Broadway Global Master and In-Arabia Solutions allegedly used India-based call centers to call more than 600,000 phone numbers across America over two years. Representatives threatened people with arrest if they did not pay and fraudulently collected more than $5.2 million, according to a complaint from the Federal Trade Commission (FTC). A temporary restraining order names the two companies as well as their owner, Kirit Patel, as defendants. The FTC's San Francisco office originally filed the complaint, which says that targeted consumers were scammed out of an average $500 each. Defendants violated the Fair Debt Collection Practices Act by misrepresenting themselves as a law enforcement agency, according to the complaint. A judge in Sacramento will decide whether to grant a preliminary injunction before the U.S. District Court for the Eastern District of California. The FTC hopes to make the closures permanent and to pursue refunds for consumers. The Better Business Bureau of Northeast California fielded 13 complaints from customers and hundreds of inquiries about Patel's companies.
- Missouri's Appeal Aims to Preserve Initiative to Cap Payday Loan Interest
Kansas City Star 11 Apr 2012
The Missouri secretary of state's office has said it will appeal a judicial ruling that invalidated the summary it drafted for a ballot initiative to limit payday loan interest rates. Cole County Circuit Judge Daniel Green said the summary being circulated was "inadequate" and "likely to deceive petition signers." Additionally, he rejected the cost estimate generated by the office. If the ruling is not overturned, any signatures collected to get the measure on the ballot would be deemed null and void. The Missourians for Responsible Lending are moving forward with the petition campaign in hopes that the signatures collected will count. The secretary of state's office declared that the summary fairly and accurately describes what the measure would do: cap the annual interest rates on payday, car title, and other short-term loans at 36 percent.
- Nevada Company to Pay Thousands in Loan Case Tied to Gift Cards
Azcentral.com 09 Apr 2012
Cash 1 LLC has agreed to a consent judgment with the Arizona attorney general's office. The Nevada-based company allegedly made high-interest loans on the sale of gift cards from large retailers such as Walmart and Target. Cash 1 was accused of using the cards to make small-dollar loans at annualized interest rates of about 360 percent, according to the A.G.'s office. "Even though state law now bans payday loans, consumers need to be very careful about other types of loans and financial products with high interest rates," Arizona A.G. Tom Horne said. The lawsuit prompted the company to forgive about $295,000 in interest from consumers who purchased the gift cards and to refund $72,000. Under the judgment, Cash 1 also must return $5,000 to people who have not yet received a refund and must pay $40,000 to the A.G.'s office.
- Mo. Judge Strikes Down Payday Loan Initiative
St. Louis Today 05 Apr 2012
A ruling by Cole County (Mo.) Circuit Judge Dan Green hinders a ballot proposal to limit payday loan interest rates. Green said that the initiative's ballot summary and financial estimate are "inadequate" and "unfair" and could mislead petition signers. According to the judge, the secretary of state's office should have mentioned in its summary that the measure would limit annualized interest rates to 36 percent on short-term loans. The financial summary from the auditor's office also underestimates how much tax revenue may be reduced due to lost business. Despite this ruling, supporters intend to keep gathering petition signatures by the deadline of May 6.
- Payday Lenders Tied to Native Americans Not Above Law, Feds Say
Huffington Post 04 Apr 2012
Some payday lenders have been joining with Native American tribes to bypass U.S. law, but now the Federal Trade Commission (FTC) is suing nearly 20 individuals and companies alleged to have been involved with payday lending in Colorado. The defendants have received law-enforcement attention since 2004. However, a Denver district judge said the alleged lenders are affiliated with some tribes that have immunity from state investigation. The exact nature of relationships between lenders and Native American tribes are primarily unknown. In some cases, the tribes themselves are the official owners of the lending operations, making it more difficult for U.S. law enforcement to target them. In its most recent case, the FTC said the defendants have caused more than 7,500 complaints to law enforcement in recent years. The agency says that tribal affiliation does not place them above federal law.
- Oklahoma Tribes Named in Payday Lending Lawsuit
Tulsa World (OK) 03 Apr 2012
The U.S. Federal Trade Commission (FTC) has filed a lawsuit against several Oklahoma tribes alleging that their payday lending operations illegally levy costs against customers. Agency officials filed the suit in U.S. District Court in Nevada, naming as defendants the Miami Tribe of Oklahoma's AMG Services and Tribal Financial Services as well as the Modoc Tribe of Oklahoma's Red Cedar Services. Internet-based loan sites Ameriloan, UnitedCashLoans, USFastCash, and 500FastCash also are named as defendants. This is the second lawsuit in seven months that the FTC has filed against payday lenders. The tribal companies have been criticized for failing to disclose fees, violating legal lending practices, and falsely threatening customers with arrest for failing to pay back bills, according to the lawsuit. The complaint additionally alleges that the defendants violated the Federal Trade Commission Act, the Truth in Lending Act, and the Electronic Fund Transfer Act. An FTC press release about the lawsuit reads, "According to documents filed by the FTC over the last five years, the defendants' deceptive and illegal tactics have generated more than 7,500 complaints to law enforcement authorities." The lawsuit asks for an immediate injunction on payday loans, restitution for victims, and a forfeiture of all assets gained through the allegedly illegal actions.