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WSJ Editorial slams CFPB regulations as “political assault” on short-term credit providers

WSJ Editorial slams CFPB regulations as “political assault” on short-term credit providers

A recent editorial penned on June 2, 2016 by the Wall Street Journal is very critical of the CFPB’s efforts to regulate the short-term lending industry.

“The Obama Administration has justified its regulatory assaults on for-profit education and coal mining with this nuanced legal reasoning: We don’t like you.  Now the Consumer Financial Protection Bureau is looking to wipe out a financial service that millions of Americans need thanks to the lousy economy of the Obama years.”

The article goes on to criticize its close ties with the center for responsible lending and the lack of consideration of how this policy  will effects on millions of americans.

To read the full article click here.

 

 

 

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OCLA Official Response to Proposed CFPB Regulations

OCLA Official Response to Proposed CFPB Regulations

 

June 2, 2016

If the rules go through unchanged, most of the industry’s lenders will go out of business. Ohio’s economy will take a $1 billion hit with more than 10,000 jobs in jeopardy. At first glance, it looks like the Bureau’s trying to regulate us out of business. What they can’t eliminate is the demand for short-term credit. We believe the CFPB should focus on broadening options for borrowers, not forcing existing market providers to shutter their doors.

The CFPB’s rules will greatly reduce or eliminate short-term lending options for more than 2 million underbanked Ohioans. That’s the opposite of the Bureau’s mandate in Dodd-Frank. The CFPB was created to protect borrowers and increase their access to credit options, not push them to unlicensed offshore lenders. Forcing every short-term lender in the country to close down doesn’t eliminate the need for short-term credit. It just puts more strain on the people the CFPB’s supposed to protect.

There’s a common misperception that the short-term lending industry is extremely profitably. Public earnings reports tell a different story. Profit margins are tight. Tight margins and risk are why there aren’t more options in the marketplace. Our model is the only private-sector solution that actually works. Every new regulation comes with a hidden cost, and eventually that cost forces our member companies underwater.

Patrick Crowley
Spokesman
Ohio Consumer Lenders Association
859-462-4245
pcrowley@strategicadvisesllc.com

 

About The Ohio Consumer Lenders Association
The mission of Ohio Consumer Lenders Association (OCLA) is to promote the common business interests of consumer financial services organizations operating in Ohio and to provide a forum for industry-wide consideration of the means for making credit available to middle class Ohioans on reasonable terms and conditions. OCLA works to promote laws and regulations that balance strong consumer protections while preserving access to a diverse credit market. All OCLA members abide by a code of Best Practices that provide appropriate safeguards for Ohio consumers. These Best Practices are intended to assist consumers in understanding the costs and responsibilities associated with short-term credit and to provide adequate and clear disclosures to allow consumers to make informed financial decisions. Furthermore the association promotes ethical transparent business policies such as easy to understand contracts, appropriate debt collection practices and honest advertising. OCLA members are held to the highest standards and pledge to provide quality financial products.

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Former top finance regulator to Feds: Don’t cut off short-term credit to consumers

Former top finance regulator to Feds: Don’t cut off short-term credit to consumers

A former top financial industry regulator is warning the Consumer Financial Protection Bureau (CFPB) that proposed new regulations could inadvertently destroy “a lifeline of credit for millions of responsible, low- and middle-income Americans.”

In a column for American Banker, William M. Isaac, a former chairman of the Federal Deposit Insurance Corp. (FDIC), wrote that he hopes the CFPB will heed his “words of caution while promulgating new rules on small-dollar lending.”

The CFPB is drafting new rules that many financial experts, lenders, members of Congress, regulators and others fear will restrict the type of short-term loans used responsibly by millions of Ohioans.

“Without a better understanding of (lenders) business models, profitability, loss rates, volume and overhead costs, regulators cannot possibly create a product that ensure consumers get the credit they need and deserve,” wrote Isaac, now senior managing director and global head of financial institutions at FTI Consulting. “Most research suggests the overwhelming majority of borrowers need credit because of a family emergency; a temporary, unexpected cash shortfall; or an occasional manageable gap between paychecks.

“Right now most of these consumers are getting credit when they need it,” Isaac continued. “Regulators must be careful that they do not destroy this supply of credit while trying to help the much smaller percentage of borrowers who probably should not be getting credit at all.”

Read Isaac’s column on the American Banker website.

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CashMax Ohio grows “Pay It Forward” program

CashMax Ohio grows “Pay It Forward” program

Stacey Nichols of CashMax Ohio in Chillicothe started a great tradition when she paid for a family’s meal at a local restaurant. It felt so good, she went back and did it again the next week.

Then, she came up with an idea: “Creating a Paying it Forward program at all 41 CashMax Ohio stores across the state.”

CashMax Ohio adopted the idea as reported in the Darke Journal:

Each Wednesday, a manager from every CashMax Ohio visits a local fast food restaurant and pays for the meals of the customers standing behind them in line. Since its inception, CashMax has effectively touched the lives of over 5,000 people/families as a result of this program.

“This kind of program and company-wide kindness makes CashMax an even better place to work,” Nichols said, “and a great place for our customers and our communities.”

CashMax Ohio has since expanded the program, and is now Paying it Forward once a week at grocery stores by selecting a person or family in the store and paying for their entire cart of groceries.

“A staff member and I went to Giant Eagle in Akron to do the new Pay It Forward program and it was an incredible experience,” said CashMax Ohio District Director Jason Luttrell. “We found a young mother and her two children with a cart full of groceries.

“When we approached her and told her what we wanted to do she was astounded, as were the grocery store workers,” Luttrell said. “She was holding back tears and she gave us a hug and thanked us. It is truly a privilege to work for a company like CashMax that consistently gives back to the communities they serve.”

Read more of this remarkable story here.

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CashMax is paying it forward

CashMax is paying it forward

One of OCLA’s member companies, CashMax Ohio landed in the news recently thanks to their “Pay It Forward” campaign. From the Huber Heights Courier:

Recently managers and employees from the CashMax store in Huber Heights went to a local Kroger to do their “Pay It Forward Program” and paid for a man’s cart full of groceries. CashMax Ohio is doing this all over the state of Ohio.

“We went to Kroger looking to do our Pay It Forward program and at the front of the store a gentlemen strolled right in front of us with a cart filled with all kinds of Thanksgiving foodies and some basic home items. He lit up when we told him he wanted to pay the bill for his groceries,” said Sarah Healy, Assistant Manager Huber Heights CashMax. “After we paid, he shared a secret with us. The merchandise that was in his cart wasn’t for him, it was for a family that had fallen on hard times and he was helping them out. Knowing that made our event out to pay it forward that much better.”

Read more here.

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Federal government report shows growing satisfaction with short-term loans

Federal government report shows growing satisfaction with short-term loans

Consumer satisfaction with short term loans continues to rise, according to a new federal report.

The Consumer Financial Protection Bureau’s (CFPB) Monthly Complaint Report showed a 12 percent decrease in the number of short term loan complaints from consumers from this summer compared to the summer of 2014, according to The Hill, a Washington-based news outlet.

“The report reaffirms what the industry has long known,” Dennis Shaul, CEO of the Consumer Financial Services Association (CFSA), told The Hill. “Consumers value payday loans as a high-quality source of credit during times of needs.”

In the story, Shaul said the report once again exposes the CFPB’s plan to saddle the short term lending industry with more federal regulations as “misguided.”

“The truth is banning payday lending does nothing to address the needs of consumers,” Shaul said. “Rather, it simply eliminates a responsible credit option and forces consumers to turn to inferior alternatives, including dangerous, illegally-operating lenders.”

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Proposed CFPB rules could cause more harm than good

Proposed CFPB rules could cause more harm than good

Recently, the CFPB proposed “rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans.”

“What the rules actually would end is the availability of much-needed credit for millions of Americans,” says Andrew F. Quinlan, the cofounder and president of the Center for Freedom and Prosperity, in a recent editorial.

The rules, Quinlan believes, could cause more harm than good.

“Borrowers who rely on payday loans don’t generally have access to alternatives. Where others might cover an unexpected expense by using a credit card, for instance, they are forced to take out small, short loans to get to their next paycheck. This is because their financial history or income makes them too risky for traditional banks.

“The CFPB wants to protect such borrowers from digging themselves into an even deeper financial hole, but in so doing it will further restrict credit to the very people who may need it most to pay bills, visit the doctor, or repair a car needed to get to work. Even CFPB’s own analysis acknowledges that between 60 percent and 80 percent of the small-dollar loan market could be eliminated, which would force many to turn to even less desirable options.”

“It’s not fun living paycheck to paycheck,” Quinlan writes. “Millions of Americans struggle with that reality daily. The last thing they need is a nanny government pretending that it is to their benefit to have their already limited options restricted even further.”

Read more at Philly.com.

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Scholars: 36% Rate Caps Don’t Work

Scholars: 36% Rate Caps Don’t Work

Critics of short-term lending often rally around a call to cap consumer loan interest rates at 36 percent. But in a recent post on the American Banker website, two scholars show why interest rate caps don’t work and aren’t financially feasible.

Thomas M. Miller Jr., a finance professor at Mississippi State University and a visiting scholar with the Mercatus Center George Mason University, and Chad Reese, assistant director of outreach for financial policy at Mercatus, write that “regulations limiting interest rates are the latest in a long series of misguided legislation and regulations that limit or deny access to important consumer credit products. Interest rate caps, like other price controls, have severe unintended consequences.”

In their column Miller and Reese addressed new regulations recently announced by the Obama administration that would expand the Military Lending Act of 2006, which caps some short term loans to military personnel at 36 percent. OCLA members don’t make loans to military personnel. But consumer groups and others have called for 36 percent interest rate caps on all consumer loans, including those made by OCLA members to millions of Ohioans, so the arguments made in the column easily translate to concerns over rate caps on other types of consumer loans.

“Is a 36 percent annual interest rate for a small-dollar loan too high?” Miller and Reese wrote. “Those who say ‘yes’ likely have a worldview shaped by large-dollar home mortgages or auto loans. But people need to borrow money for many reasons. Millions of Americans rely on nonbank-supplied small-dollar loans to meet wide-ranging credit demands like durable goods purchases or for unexpected automobile repairs.”

“With or without (short term lenders),” the scholars wrote, “the demand for short-term credit will still exist.”

To learn more about how capping interest rates on small term loans is bad policy and not feasible, read the entire article at:

http://www.americanbanker.com/bankthink/why-a-36-cap-is-too-low-for-small-dollar-loans-1075824-1.html

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Consumer of the Month: Kenneth

Consumer of the Month: Kenneth

OCLA interviewed Kenneth from Mt. Vernon, Ohio in March 2013. Here’s a transcript from the interview:

Do you feel that the charges for these services are upfront and transparent?

I don’t have too many gray areas in my life. If I don’t like it, I’m out of here, so you know, they’ve never tried to pull any scam on me or anything.

Has there been a time when these services have helped you through a crisis?

Yeah. Or I wouldn’t be here if I didn’t need the assistance. We get along great with these folks, and sometimes I don’t need their help and sometimes I do, so it’s no big deal.

Do you feel this industry tries to trap you in a cycle of debt?

Not really. I think they’re providing a service. I don’t think you’re trapped. Sometimes, economics just get out of hand. You don’t have a choice, and gee, if I was like President Obama and could blow $5 or $6 million on a vacation, I wouldn’t be here, but guess what, I don’t and so that’s why I’m here.

What would happen to you or the community if these services were eliminated?

Oh man. I always try to schedule my time to come in here and pay a loan on an off day. There’s a lot of people that would just be out of luck. They’d just be down because if you come in here on the third or the first, I mean it’s standing room only. It’s a necessary service.

What would you say to those people trying eliminate these services?

I’m thinking they’re being foolish. People wouldn’t use them if they weren’t available. I mean, I don’t think it’s a trap. People come here for a purpose. Maybe it’s one time, me, I come in every now and again, it’s just a service. I saw a warning they put up on outrageous interest, well that’s for a year, I’m only in it for a month, sometimes, I don’t come in at all, but then, there’s other days you do. You go to a standard loan company, they’re hitting you for 25, 26 (percent interest vs. lower short-term interest here), so where’s the big saving in that? If you go counting that up over a year, you’re in trouble.

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