Payday Lending News
The latest news on payday loans and the payday lending industry from the Center for Responsible Lending.
- Editorial: Crack Down on Abusive Lending
Cincinnati Enquirer 17 Sep 2013
This Cincinnati Enquirer editorial calls on regulators at the Ohio Department of Commerce "to step in, investigate, and then revoke the licenses of those businesses found to be evading payday lending laws."
- Online Lender Seeks Dismissal of New York Suit
Wall Street Journal 17 Sep 2013
Western Sky Financial LLC, an online lender targeted by state regulators for charging steep interest rates, said Sept. 17 that a lawsuit filed against it by New York Attorney General Eric Schneiderman should be dismissed because the state lacks authority over the business.
- Making Money Off the Poor
New York Times Opinionator 17 Sep 2013
Many different businesses and schemes are making money off of low-income Americans, Tom Edsall writes in a New York Times opinion piece.
- Montgomery City Councilmen Seek Moratorium on Payday Lenders
WSFA-12 (AL) 20 Aug 2013
An item on the Montgomery, Ala., city council's agenda could threaten the future of payday and title loan businesses in the city. Councilmen Richard Bollinger and Charles Smith have proposed a temporary freeze on business licenses for these types of lending agencies.
- Opponents Say Bill Opens Up Door for Payday Lenders
Log Cabin Democrat (Arkansas) 23 Mar 2013
Arkansas has been free of payday lenders for nearly four years, after its Supreme Court declared that their triple-digit annual interest rates for short-term loans violated a state law against usury. Now, however, critics of the industry are worried that a new proposal in the Legislature will allow payday lenders to creep back into Arkansas...
- Lawmakers File Bills on Payday Lending
Denton Record-Chronicle (TX) 21 Mar 2013
Texas Sen. John Corona (R-Dallas) recently introduced Senate Bill 1247 in an attempt to change the way payday lenders operate and how cities can control them. Some say, however, that it is not enough to curtail the problem...
- Dimon Pledges to Change JPMorgan’s Practices on Payday Loans
New York Times 27 Feb 2013
Calling the practice "terrible," JPMorgan Chase CEO Jamie Dimon has pledged to revamp how the bank addresses automatic account withdrawals made by Internet-based payday lenders. JPMorgan Chase does not make the loans directly but does enable online payday lenders to deduct payments from customers’ checking accounts, even in the 15 states that prohibit such loans. Sometimes these withdrawals continue even after customers have asked banks to prevent it. More payday lenders are operating online in order to avoid state-based limits on interest rates. Lawmakers also are addressing the issue. In July, Sen. Jeff Merkley (D-Ore.) introduced a bill that would force payday lenders to follow the laws of states where the borrower is located. Part of the bill, pending in Congress, would allow borrowers to more easily halt automatic withdrawals. A new report by the Pew Charitable Trusts, meanwhile, finds that an estimated 27 percent of payday loan borrowers say the loans caused them to overdraw their accounts.
- U.S. Consumer Watchdog Meeting With States on Offshore Lenders
Reuters 26 Feb 2013
U.S. Consumer Financial Protection Bureau (CFPB) director Richard Cordray said Feb. 26 that his agency is working with state authorities to rein in payday lenders that are located outside the United States and operating over the Web. Consumer advocates say some lenders are moving online to avoid the rules in states that are tougher on payday loan firms. Cordray said during a conference of the National Association of Attorneys General that the CFPB wants to ensure that individuals can obtain emergency cash without being cornered by loans with exorbitant fees that must be repaid quickly. "We also recognize that effective enforcement of the law can be challenging when it comes to lenders that lack a physical presence," said Cordray. "Our enforcement teams have met with some of your offices in multi-state meetings to consider how best to coordinate our efforts on loans that involve offshore or other jurisdictional issues."
- Ferri Again Seeks to Eliminate High Interest for Payday Borrowers
Warwick Beacon (RI) 05 Feb 2013
Rhode Island Rep. Frank Ferri (D-Warwick), for the second time in less than a year, has drafted legislation that would strike language from the state’s usury law that lets payday lenders impose triple-digit interest rates. His proposal would not abolish payday loans but would subject them to the same usury laws as other lenders. Ferri hopes to lower Rhode Island’s average interest rate from 260 percent to 36 percent or lower. The usury cap historically has been at 36 percent, preventing a payday loan debt trap, but legislation in 2001 exempted these lenders. The Center for Responsible Lending reports that 17 states and Washington, D.C., have similar caps on interest rates. Ferri submitted the bill in early January; he expects it to go before the House sometime this month. Fifty-one other representatives signed on as co-sponsors. Ferri introduced a similar bill in 2012, but it never came to the floor.
- Demand for High-Interest Payday Loans Soars in Minnesota
MinnPost.com (MN) 28 Jan 2013
A growing number of Minnesotans are using high-interest payday loans and other nontraditional financial services, according to statistics. Demand for payday loans doubled from 170,000 loans in 2007 to 350,000 -- the highest ever reported to the state Department of Commerce -- last year. Borrowers in 2011 paid fees and interest equivalent to average annual interest rates of 237 percent, according to the Minnesota Department of Commerce, with some loans reaching as high as 1,368 percent. While short-term lenders say their services are to be used only in emergencies, critics argue that the lenders' business model hinges on consumers taking out habitual loans, multiple times a year. Out of the 11,500 Minnesotans who used short-term loans last year, nearly a quarter took out 15 or more loans. Many fast-cash lenders in the state are not licensed as a payday lender. Instead, they are licensed as Industrial Loan and Thrift operations, which allows them to offer bigger loans at higher rates. In 1995, the state Legislature tried to minimize payday lending in the state by creating the Consumer Small Loan Lender Act, which capped the maximum amount of an individual loan at $350. That cap does not apply to businesses operating as Industrial Loan and Thrifts. Over the years, several lawmakers have introduced bills seeking to close the loophole, but none have been successful. Meanwhile, consumer advocates are concerned that payday lending practices are hurting borrowers -- including minority and low-income consumers -- and prolonging their dependence on quick, expensive cash.
- Lawmakers Push Payday Lender Bill
Wall Street Journal 19 Jul 2012
House lawmakers are pushing new legislation that would allow nonbank lenders, including payday lenders, to choose to operate under a federal charter instead of following different state laws. Backers of the measure say it would help consumers who are unable to obtain affordable credit from traditional sources. Introduced by Reps. Blaine Luetkemeyer (R-Mo.) and Joe Baca (D-Calif.), the bill would allow the payday loan industry to circumvent rules enforced by the Consumer Financial Protection Bureau. Instead, nonbank lenders that received a federal charter would be under the supervision of the Comptroller of the Currency. However, the proposal would prohibit loan periods of less than one month; and firms could not make loans that they do not believe consumers can pay back. But consumer advocates say the law would not ban predatory lenders from charging excessive fees and other unscrupulous practices. The legislation would actually block regulators from capping the interest rate or fees that nonbank lenders could charge for loans made under the federal charter, allowing predatory lenders to evade state usury laws.
- Nationwide Pew Survey Challenges Conventional Wisdom on Payday Loans
MarketWatch 18 Jul 2012
Pew Charitable Trusts has released a new report, "Payday Lending in America: Who Borrows, Where They Borrow, and Why." In it, the organization calculates that U.S. consumers spend $7.4 billion annually on payday loans, forking out interest at an average of $520 per borrower for eight $375 loans or extensions. Payday loans often are considered a "last resort," but a majority of short-term borrowers cited several alternatives they would use if payday loans become unavailable. Nick Bourke, project director for Pew's Safe Small-Dollar Loan Research Project, notes that while payday loan regulations have effectively curtailed storefront operations, they have not prompted consumers to seek such loans online. "In states that restrict storefront lending, 95 percent of would-be borrowers have elected not to use payday loans at all. Just five percent went online or elsewhere," he reports. Pew's survey about payday borrowing found that most users are employed, white, female, and 25 to 44 years old. A disproportionate amount of consumers who use payday loan products, however, lack a four-year college degree, are home renters, are African American, earn less than $40,000 annually, and are separated or divorced. Pew also discovered that most consumers use payday loans for everyday living expenses -- including shelter and utilities -- rather than for emergencies.