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Flawed and Misleading Payday Press Reports From December 2, 2006

Even though these stories are not directly related to title lending most of our members make payday loans and from the public and the press perspective there is not much difference between the two.  These types of articles effect both industries equally bad.

Here are the articles:   Birmingham News TV

A series of misleading news articles appeared in the press around December 2, 2006.  It turns out the source for the articles is the Center for Responsible Lending (CRL).  Minimal research shows CRL to be a consumer organization with most of their leadership noted for supporting highly liberal causes.

What is so amazing is no local industry source was asked to respond to these articles for accuracy or opinion!  Actually, if you look at the quotes from the press coverage all but one of the quotes was from CRL and their friends (Julian Bond, NAACP and Consumer Federation of America).  So much for fair and accurate reporting!

It turns out that Community Financial Services Association (CFSA), a payday advance trade association, responded with a factual and excellent rebuttal.  As you might expect, the response received virtually no press coverage. You should read the CFSA response (go here for a condensed version).  Their response debunks the propaganda and flawed studies from CRL and the press.

Here are the primary points of the CRL based news articles:

  • Alabama consumers spend $225M in extra fees for payday loans

  • Payday loans sink borrowers into hopeless debt by locking them in

  • Typical borrower pays back $793 for a $325 loan

  • Industry preys on low-income minorities

Here are important industry facts and estimates that for the most part went unreported:

  • There are approximately 1200 payday lenders in Alabama who are licensed, approved and audited for compliance by the State.  On this fact we agree.  Of course none of the press coverage mentioned the fact the industry is monitored and highly regulated by state agencies.

  • The average consumer payday advance loan is $325.  This is most likely an accurate number from CRL and the press.

  • The number of outstanding loans statewide is estimated to be less than 160,000 (1)The CRL reports a number of over 1,400,000,000 transactions which is flawed and highly misleading.

  • Less than 4% of the population in Alabama has an outstanding payday loan (based on calculations from above).  A fact not mentioned by CRL or the press.  See NBC news data here for more. 

  • There is absolutely no evidence that the 4% of the population who use payday advance are minorities who are out of proportion to the local population.

  • Payday advance borrowers spend less than $2.35 a day for this service (2) Where is the social impact?   

  • A $17.50 fee for a $100 payday advance (many companies charge less) compares to fees on other competing financial transactions as follows:

    • $26.90 fee for $100 in overdraft protection

    • $37.00 fee on a $100 late credit card bill

    • $46.16 fee for a late reconnect fee on a $100 utility bill

    • $54.04 fee for a bounced check from the bank and merchant

What is the prudent choice when confronted with one of the choices above?  Should you pay $17.50 for a payday advance loan or $54.04 for a bounced check?  We think we know the correct answer.  Again, this is a point totally ignored by CRL and the press. (This data is from the CFSA report.)

In closing, the payday advance industry has grown dramatically over the last five years.  There is a reason -- it fills a high demand market need.  To our knowledge no one has ever been forced into a payday loan transaction against their will.  It is a choice that an individual makes based on full disclosure (which is a significant part of the state regulation).  The overwhelming majority of borrowers are happy with the service as noted by the number of consumer complaints at the State Banking Department and even the one-sided NBC poll mentioned here.  It is not uncommon for customers to express their heartfelt and sincere gratitude for help when they have nowhere else to turn.  Payday loans have helped many in dire emergencies when there were just no other alternatives and our customers often tell us so.

We do not understand why the press and groups like CRL want to distort the facts to further their own cause.  If they were held to the same disclosure and regulation laws as our industry, they would be in serious legal trouble.  Non compliance for accurate disclosure in our industry brings quite severe penalties for the offender.  And throughout all of their misleading attacks they never present a realistic alternative for our customers and the industry they are so intent on demeaning. 

From these articles it is quite evident that this study and the report from the press totally ignore the real facts.  There is clearly injustice here -- but who is the target? 

 
 

Title Pawn Council Of Alabama

PO Box 361782

Birmingham, AL  35236

tpca@mindspring.com

 

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Birmingham, AL

Payday & Title Loan Software

205-733-9926