In an op-ed in American Banker, Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), criticized CFPB Director Richard Cordray for his comments during a recent House Financial Services Hearing. Cordray remarked that in the 14 states where there are short-term lending bans, consumers "seem to get by just fine." What Cordray fails to acknowledge is that there is in fact short-term lending in those states – though a more costly and dangers kind from offshore, unregulated lenders and other inferior alternatives.
"...on the day of Cordray’s hearing, at least 11,600 consumers in these 14 states went online seeking a payday loan, according to data from the nonprime credit bureau Clarity Services Inc. Further, in the fourth quarter of 2016, an estimated 2.7 million payday loan applications were submitted online from these same states.
The truth is, in the states that do not permit regulated payday lending, people find many other ways to meet their need for small-dollar credit. They bounce more checks, complain more about illegal lenders and debt collectors, and file for bankruptcy at a higher rate than in states where short-term loans are available, according to a Federal Reserve staff study. These consumers find fewer alternative financial options and resort to costlier, unregulated options for short-term credit, according to reports from the U.S. Department of the Treasury in concert with The Urban Institute."