December 2, 2006

The following is a condensed version of the CFSA response to the Center For Responsible Lending (CRL) report.  For the CRL report go here.  For the full CFSA reply, go here.

The The Center for Responsibnle Lending (CRL) released a report today containing intentionally misleading and, in some case, blatantly false information regarding the Payday Loan industry. The Community Financial Services Association of America (CFSA) dismissed a report as "lacking perspective."

"This rehash of flawed statistics is designed for publicity purposes, not a serious discussion of consumer lending needs. Payday loan customers like the service because it is often their best financial option. The Center for Responsible Lending is opposed to virtually every consumer choice when it comes to short-term credit," said Darrin Andersen, CFSA president.

.The Center for Responsible Lending claims borrowers pay $4.2 billion dollars in fees every year, but fails to mention that consumers receive $40 billion in credit for the fees. To put it in perspective:

* Consumers will pay $4.2 billion in ATM service charges in 2006 to withdraw their own money

* Consumers pay an estimated $22 billion in NSF fees to banks and credit unions

* Banks collect an estimated $10.3 billion annually for overdraft protection services

* In 2000, consumers paid credit card interest of more than $87 billion

* An estimated $57 billion in late bill payment fees were collected by businesses in 2003, more than 140 percent of the total estimated payday lending volume in the United States

* Credit card late fee penalties totaled over $11 billion in 2005(6)

Andersen also rejected the notion put forward by the Center for Responsible Lending that the industry's business model encourages rollovers or extensions of loans to be profitable. He added, "Rollovers are limited by CFSA member companies and by law in 37 states. Our industry continues to operate profitably in states where rollovers are not allowed because more than 90 percent of payday loans are repaid when due."

In fact, a 2005 working paper by the FDIC's Center for Financial Research stated, "the industry's profitability does not depend on the presence of repeat ("trapped"?) borrowers per se."

"The bottom line is that consumer spend $4.2 billion a year for a product they choose over the alternatives. Consumers are very capable of making decisions without self-appointed guardians, like Center for Responsible Lending, who profess to represent consumers' interest," Andersen concluded.

A quick look at the alternatives:

Credit alternative

$100 Payday Advance 

$100 Overdraft protection

Credit card late fee on $100 bill

Late/Disconnect fee on $100 utility bill

$100 Bounced check NSF/Merchant







Sources: Avg. NSF fee $27.40 (, Fall 2006); Avg. merchant returned check fee $26.64 (2006 CFSA fee survey); Avg. utility late and reconnect fee (2006 CFSA fee survey); Avg. credit card late fee (Credit Cards: Increased Complexity in Rates and Fees, Government Accountability Office, 2006); Avg. overdraft protection fee ( 2005); Typical payday advance fee (CFSA).

(1) Fall 2006 Survey
(2) Contrasting Payday Loans to Bounced Check Fees, Consumer Credit
Research Foundation, Thomas E. Lehman, Ph.D., 2005
(3) Overdraft Fees Can Overwhelm, Washington Post, June 26, 2005
(4) Public Interest Research Group, 2002
(5) Sizing NSF-Related Fees, BAI Banking Strategies Magazine, Bill
Stoneman, January-February, 2005.
(6), November 2006