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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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Short-term loans increasingly mainstream

Short-term consumer loans have long been viewed as a fringe service, but the recent financial crisis proved that the middle class uses them, too. A new Urban Institute study found that 41% of American households reported using “alternative financial services” in 2011. That’s up from 36% in 2009, Time reports. Prepaid debit cards make up a fair portion of that growth, but some 14% of households reported using “nonbank credit.”

Nonbank credit includes payday loans, pawn shops, rent-to-own contracts and tax refund anticipation loans. It’s a sign that there’s a demonstrated need for the product. And that need has grown fastest among households earning over $75,000 a year, Time reports. Households earning between $50,000 and $75,000 were the second-fastest growing demographic while those who make $15,000 or less a year actually scaled back their use of nonbank credit.

The growth in nonbank transactions coincides with a reduction in access to credit. “Across all of these metrics (including new account originations and total credit lines), credit appears to be less available today than it was in 2007,” the CFPB reported recently. Short-term consumer loans fill that gap.

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