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CRL Summary Points from NCCOB Report 2011

March 1, 2011
Financial Literacy

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  • "In light of the foregoing findings and after careful consideration of the following report and submissions from meeting participants, the Commissioner does not recommend any changes in the CFA [Consumer Finance Act], either to enhance industry revenue or increase consumer protections."

  • The report is the culmination of four NCCOB-sponsored meetings – three and one half of which were dedicated to industry presentations -- and months of data analysis and other research. This is in addition to two separate legislative study commissions in 2009 and early 2010.

  • Consumer finance companies in NC are profitable.

    • "…[T]he consumer finance installment loan industry continues to demonstrate potential for profit under the CFA. Lenders reported an aggregate profit in 2009. Over the past 12 years, the majority of licensees have been profitable, and the aggregate industry net worth more than doubled between 1998 and 2009."

  • Lenders simply want the legislature to guarantee higher profits.

    • "[T]he majority of these companies remain profitable and the potential for profitability continues to exist under the current framework, although lenders may not be as profitable as they would like."

  • Consumer finance companies have faced stiff competition from other lending channels, including credit cards and home equity loans along with changes in the industry, and are as such not growing as much as they would like.

    • "Due to structural changes in the market, we see a long-term decline in the share of consumer credit provided by consumer finance companies. The efficient and convenient credit card has come to dominate consumer credit, eclipsing the traditional, hands-on, brick-and-mortar model of the consumer finance lender."

  • The financial crisis has also had an impact on consumer finance lenders that should not form a basis for increasing interest rates or fees.

    • "Our analysis leads us to caution that permanent changes to the CFA may not be an appropriate response to temporary economic conditions that are not under the control of lenders or legislators."

  • Increasing the cost of consumer finance loans is not the answer to the issue of the unbanked or under-banked.

    • "The conclusions of this report are not intended to suggest that the financial services provided to unbanked and under-banked North Carolinians are satisfactory. It is to suggest that efficient and low cost services to this market cannot be fully achieved by either traditional depository institutions or traditional small loan companies."