Fulmer: CFPB should be fair to payday lenders, consumers
By Jamie Fulmer
February 24, 2015
The Consumer Financial Protection Bureau (CFPB) is poised to fundamentally change how hardworking taxpayers across the U.S. access and use short-term loans. While regulations can provide important and needed consumer protections, the CFPB must carefully weigh how to positively shape the short-term lending market without restricting Americans’ ability to acquire credit.
In Advance America centers across the country, my colleagues help teachers, salespeople, newspaper editors and small-business owners manage their finances each day. They witness firsthand how difficult it can be to choose between a car or home repair, paying other expenses or buying a child a birthday cake.
It is through these daily interactions with American consumers that we recognize how misguided regulations can too often hurt consumers’ ability to access credit when they need it most.
Unfortunately, Washington flatly misunderstands how and why borrowers use payday loans yet wants to control their decisions. These federal officials – and the journalists, consumer advocates and policymakers who sharply criticize our industry – claim they want to protect borrowers. Yet they do little to understand why millions of Americans choose these loans over other similar products, or what would happen if that choice was taken away.
While rule-making for short-term loans appears to be drawing near, the CFPB does not seem to be using a fact-based approach about the experiences of borrowers. The CFPB’s own analysis of the complaints it receives found that payday loans comprise less than 1 percent of the total, and the vast majority of that 1 percent are complaints against unregulated, unlicensed lenders and illegal scam artists pretending to be lenders. When confronted with clear evidence of how borrowers value and use payday loans, the CFPB has chosen to look the other way.
Moreover, while CFPB Director Richard Cordray has stressed in countless speeches and interviews his commitment to regulations that limit the traditional two-week payday loan, he has seemingly ignored other kinds of short-term credit. In the real world, our customers use payday loans interchangeably with services such as bank overdraft programs.
If new rules make it harder to access one type of short-term credit, but don’t affect similar products offered by banks or unlicensed lenders, people will be forced into higher-priced and lower-quality services. Instead of providing financial independence and choice, Washington will control which products consumers can have.
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