Why are there more complaints about payday lending where it doesn’t exist?
An analysis of the Consumer Financial Protection Bureau’s (CFPB) complaint database shows that when controlled for population, consumers in states that ban payday lending complained more about payday loans than those in states with regulated lending.
In the Bureau’s worldview, severely limiting access to regulated payday loans — as their proposed rules would — eliminates consumers’ problems with short-term credit. But if that were true, there wouldn’t be any complaints in states that ban payday lending.
But the CFPB’s own complaint data reveal that is far from reality. Why? Because banning payday lending does nothing to address the needs of consumers; it simply eliminates an accountable credit option and drives them to miss bill payments, use overdraft programs, or turn to dangerous, illegally-operating lenders.
State-Regulated Lenders Account for a Fraction of Total Complaints
A closer examination of the Bureau’s payday lending complaints shows a similar gulf between responsible, state-regulated lenders — those that will be affected by the proposed regulations — and illegal, unregulated lenders.
Complaints against members of the Community Financial Services Association (CFSA), all of which are state-regulated and agree to not only abide by all state and federal laws but also by a set of Best Practices, including responsible debt collection, account for less than 20 percent of all complaints.
The vast majority of the remaining 81 percent of payday lending complaints to the CFPB involve illegal, unlicensed lenders. The Bureau’s proposed payday lending regulations would do nothing to stop these illegal operators; in fact, the proposed regulations would force consumers into the arms of these unscrupulous lenders.
CFPB Continues to Inflate Complaints to Justify Payday Regulations
Payday loans continue to represent an exceedingly small number of complaints — just 9,991 of the 677,182 total complaints, or less than 1.5 percent. And as with all of the complaints received by the Bureau, a significant number of these are unverified, with most likely relating to illegal lenders and scammers.
The CFPB — following an apparent pattern — is conflating data to shore up its case for overreaching payday lending regulations. Under the current proposal, new rulemaking from the CFPB would not address those aspects of payday lending — unregulated lenders and debt collection scams — where there are significant, notable complaints and evidence of consumer harm.