Category: national

  • Payday loans in TIME magazine

    In an article titled “Six Problems the Consumer Financial Protection Bureau Should Tackle First” payday lending made the cut.

    The problem w/ these fixes is that it puts people with good credit on the same plane with people with bad credit.  Basically, it creates a much bigger problem than it solves.

    Here is their solution:

    Consumer advocates would like the CFPB to push for a rule that would limit the number of times a payday loan could be flipped into a new loan. After that, the lender would have to work out a payment plan that capped the loan’s final fees, or convert the loan into a typical installment loan with minimum monthly payments that could be made penalty-free.

    Here’s the full list:

  • America’s dirty little secret

    I know this is a little off topic, but I think it’s worth sharing.   According to NPR:

    “..nearly half (47%) of all Americans don’t have to pay any federal income tax.”

    Why isn’t Obama trying to squeeze the 100M+ people for a few dollars?  I think I know the answer.  100% of these people (that actually voted), voted for him.  They will again b/c the asylum has been handed over to the inmates.

    So the next time people bring up raising taxes on the $250 and up club, which is only about 2% of the population, throw this little fact in their face.  According to factcheck.org:

    “Those reporting adjusted gross income of more than $250,000 to the IRS are projected to make up 2 percent of households next year, when the new president will take office. Those folks will earn 24.1 percent of all income, and pay 43.6 percent of all personal federal income taxes, the Tax Policy Center figures.”

    You don’t make poor people rich by making rich people poor.

  • 2009 better than expected for payday lenders

    Lynn DeVault, board chair of the Community Financial Services Association of America, says, “In the end, things have been relatively positive.”

    Currently, the CFSA is tracking about 178 bills in the states. It opposes 101 of those.

    The states that will likely have a lot of attention in 2010 are: Arizona, Wisconsin, Colorado and Ohio.

    You can read more details at Cheklist Magazine Online.

  • It’s almost official. We’re turning into Europe.

    The CFPA is getting steam. The final vote, in the House, was 223 to 202. No Republicans voted for the bill and 27 Democrats voted against it. The legislation now heads to the senate.

    Republicans Pat Tiberi made an good comment:

    “This bill would do nothing more than make government bailout programs a permanent part of our economy, paving the way for more government control in our everyday lives.”

    You can read more in the Columbus Dispatch.

  • National Arbitraion Forum Fallout

    This is older news, but I think it’s worth discussing b/c the fallout is starting. The National Arbitration Forum is voluntarily ceasing consumer arbitrations. You can read an in depth article titled “National Arbitration Forum to Cease Administering All Consumer Arbitrations in Response to Mounting Legal and Legislative Challenges.“

    Why are arbitration agreements important? I’m not an expert, but it does limit a borrowers ability to start or potentially participate in a class action lawsuit.

    What should you do? Every payday lender should also make sure to remove National Arbitration Forum (1-800-474-2371) from their arbitration agreements. I’m just guessing, but having a defunct arbitration company may void your arbitration agreement.

    A few that you can probably still use are: the American Arbitration Association (1-800-778-7879) http://www.adr.org/ or JAMS (1-800-352-5267) http://www.jamsadr.com/.

  • PaydayPolitics.org

    I just noticed a new payday political blog at Payday Pundit.

    It’s called PaydayPolitics.org.

    Here is a taste of some of the good stuff:
    “The only people that benefit from unreasonably restrictive regulation of payday loan companies are criminals like “loan sharks” who would see their own share of the market grow.” Lance Weber

    “Loans to people with bad credit records are inherently risky. The solution to interest rates that are “too high” is more competition, not more regulation.” Michael Munger

  • Taking a different angle on payday loans

    Ray Fishman writes a thought provoking article in Slate Magazine about the psychology of payday loans titled “400 Percent APR—Is That Good?“

    What I like about the article is that it approaches payday loan abuse from the correct angle. Basically, he says that most people using payday loans do not understand the true cost of the transaction and the the APR actually is not a good metric.

    I know this isn’t going to be popular, but I want to see this industry continue. Quoting a payday loan as a daily rate $2.35 per day, is a bad idea. Trying to make an expensive product look inexpensive is why most people turn off when the industry talks.

    Payday loans are expensive because many people do not pay. The people that pay have to cover the losses for the people that don’t pay. This is why 36% does not work. Every lender would go out of business.

    Legislators, instead of limiting rollovers, should demand another, more practical, method of disclosure. Create an schedule for a loan that is rolled over 3 times and show the nominal cost of the loan.

    Anyone that’s been successful in this industry knows that if the borrower needs the money, they’re going to take it. Maybe this type of disclosure could be used to build credibility for the industry.

    As far as I’m concerned, providing clearer disclosure will win over the people that are on the fence with payday loans. That’s what the payday lending side needs to do. Get people that don’t care, to care; and be on our side.

  • Bankers weary of consumer watchdog agency for financial products

    President Obama wants more watch dogs. The financial community does not agree. The agency would oversee just about every available consumer financial product, from payday loans and credit cards to loans from banks and nonbank mortgage lenders.

    Answer this much, “How effective is the SEC?” Hello Bernie Madoff. We don’t need another straw man.

    Anyway, there is some good banter on this proposed agency here.

  • Let’s Treat Borrowers Like Adults

    Payday Pundit found an excellent opinion, written by Todd J. Zywicki, professor of law at George Mason University, in the Wall Street Journal titled, Let’s Treat Borrowers Like Adults.

    The opinion is a great read, but I seem to be enjoying the comments these days. This one is hilarious:

    Darren Keenan wrote:
    Hear hear, yes. Let’s treat adults like adults. When it comes time for me to pull some of the equity out of my home, I want all the options I can get. If those options are too complex for me to understand, then I (and by “I”, I mean everyone) shouldn’t be looking to use those products. “A man has to know his limitations” someone once said.It would be nice if we had the option of signing a piece of paper declaring our adulthood so we could take advantage of programs outside the government’s purview. While removing risk usually lowers rates, in this case, the cost of risk removal would lead to higher rates. Can I (being a mature adult) decide for myself what risk/rate I find acceptable?That would be a nice change from where things are headed.

  • Obama’s plan

    “President Barack Obama asked Congress on Tuesday to create a new agency to police the fine print on credit card bills and mortgage documents and determine what fees, penalties and interest rates are fair.”

    Unlike mortgages and credit cards, I think payday loans are very straight forward. If you have not figured out that rolling over a payday loan more than 3 times is a really bad idea, then payday loans are not your biggest problem.

    Now, I believe the payday loan industry should provide complete disclosure. For the most part, I believe it does. For example, it’s common for the promissory note to display:

    CUSTOMER NOTE: Payday advances should be used for short term financial needs only, not as a long term financial solution. Customers with credit difficulties should seek credit counseling.

    OR

    YOU CANNOT BE PROSECUTED IN CRIMINAL COURT TO COLLECT THIS LOAN.

    Everyone should read this article in the Associated Press titled “Administration sends Congress consumer legislation.“