The Center for Responsible Lending (CRL) has a history of distorting the truth concerning payday loans (PDLs), used by 6 million Americans to meet short-term credit needs. However, the CRL is merely a front for the Self-Help Foundation, a credit union in direct competition with payday lenders, whose founders were principal purveyors of destructive subprime mortgages as evidenced in recent exposés by 60 Minutes and The New York Times.
This time, they’ve cooked up a “report” claiming PDL stores “are most heavily concentrated in African-American and Latino communities in California”. But what is the methodology behind this “research”? We don’t know, because unlike legitimate, independent studies, their methodology is not revealed. Nor does the report’s “senior researcher”, Leslie Parrish, have any discernible background in statistics, economics, public policy, government or business.
This is another scurrilous attempt to bamboozle the media, politicians, and the public with an inflammatory headline. The only problem, besides the CRL’s reprehensible and cynical disingenuousness, is that their “report” reveals an undercurrent of racism.
We shouldn’t be surprised. They tried this in 2006 with a report entitled “Race Matters” which Dr. Thomas Lehman, an Indiana Wesleyan University economics professor, said “contains severe weaknesses and presents conclusions that are overstated at best, and misleading at worst…perhaps motivated by an ideological bias against the PDL industry”.
The primary assertion of the CRL’s new “report” is that “Payday lenders are nearly eight times as concentrated in neighborhoods with the largest shares of African Americans and Latinos as compared to white neighborhoods, draining nearly $247 million in fees per year from these communities. ”
Oh, really?
Payday loans are used by those in need of short-term credit and earning $25,000 - $50,000. So, naturally payday loan stores will cluster in neighborhoods with lower incomes, just as gas stations cluster at freeway exits, and retail businesses cluster in shopping malls. It has nothing to do with race, other than by coincidence.
Furthermore, $247 million in fees were not “drained” from anywhere. The language infers that this money was taken without its owner’s consent or without them getting anything in return. Baloney. What consumers get when they take out a payday loan is short-term credit they can’t get anywhere else. They use that credit to make ends meet, and SEC filings of PDL companies show a 94% payback rate.
This brings us to the most egregious example of the CRL’s sordid tactics — the outright claim that payday lenders cluster where they do purely because of racism. This claim is not only patently false, but exposes the CRL as both race-baiters and racists themselves.
The idea that a business would deliberately establish a operational policy driven by racist policy is ludicrous in the extreme. Where a payday loan store, or a store of any kind, is located depends on dozens of variables. The idea that practical operational considerations would somehow be trumped by the neighborhood’s ethnicity shows the despicable lengths to which the CRL will go to further their agenda.
That’s the race-baiting portion. The CRL’s racism is evident in their call for a 36% APR rate cap on payday loans. Due to the 6% default rate and average monthly store overhead of $8000, payday lenders must make at least $15 per hundred to make a profit. A 36% rate cap earns them $1.38 per hundred, which cuts revenue by 90%. One look at the financials of any public PDL company will show how that puts them out of business.
That forces consumers to their only other short-term credit option – bouncing checks. The December 2008 FDIC Study on Overdraft Programs and NSF fees proves that this method of short-term credit is four times more expensive than a payday loan, and can snowball into even higher fees.
The CRL’s call for this rate cap is an effort to rob minorities of their freedom of choice, and strip them of more of their hard-earned money than is necessary. Why? The CRL doesn’t like freedom. It doesn’t like people to do as they choose with their own credit. The CRL wants minority consumers to be their economic slaves, by making them dependent on their own credit unions’ overdraft protection plans and oppressive lending terms.
Leslie Parrish should hang her head in shame, along with the rest of the scoundrels at the CRL. The only legislation involving this organization should be one banning them permanently.
Lawrence Meyers is President of PDL Capital, LLC, a financial journalist and analyst, and writes the occasional article for Bloggernews.net. He can be reached at pdlcapital@earthlink.net
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12 users commented in " My Name is the Center for Responsible Lending, and I’m Here to Deceive You! "
Follow-up comment rss or Leave a TrackbackWhat happened to us being responsible for ourselves? There was a time not too long ago that we borrowed $300 from cashloancity.com and had it paid back in a month without any problems. Heck, our credit cards charged us $40 for being a day late and charged us another $40 because that put us over our limit. Why isn’t that being talked about?
I don’t know, Ray, but if you want to advertise your payday loan company over and over again, I’d appreciate it if you didn’t do it in the comment sections of all of my frakking articles!!!!!!!!!!
Ray’s busted!!!
CRL makes my blood boil, and scoundrels is a prefect word to describe them. Looking to protect consumers is one thing, manipulating and obfuscating data based solely on ideology is another. I believe the literal definition of this tactic is called “lying”.
So let me get this right… It is just a coincidence that people of color are poor and just another coincidence that payday companies just end up giving them loans?
Beyond that CRL are just lying liars… maybe but I kind of doubt it however in the interest of full disclosure… How much did you earn last year off the backs of the poor? 25000- 50,000? Are you a journalist or do you run a capital firm for the payday lending industry? A quick search of your name provides this
“Lawrence Meyers, Partner, Sabric Enterprises: Mr. Meyers is currently a partner in Sabric Enterprises, a firm that helps payday lenders obtain money to grow their businesses.”
About Sabric Enterprises: “Sabric Enterprises is a Los-Angeles-based private equity firm that provides expansion capital to payday lenders. Sabric also assists Texas-based payday lenders in converting to Credit Services Organizations (CSOs) and providing them with third-party lenders. They also provide software and collection agency referrals.”
To refer to yourself as a journalist is stretching the word about far as it can go.
They NYT hits the mark
Evidence suggests that easy credit access is more like heroin and cocaine than alcohol. This evidence recently led Congress to cap the annual interest rate on payday loans to military personnel at 36 percent. In New York and 10 other states, similar restrictions apply to loans to the general public, in each case making payday lending effectively illegal.
“Those who feel that payday lending is a bad thing are inclined to vent their anger about the hardships it has created. But outrage directed at payday lenders cannot prevent those hardships, just as outrage directed at alpha male lions cannot prevent them from killing cubs. A more deserving target would be legislators who supported lax credit laws in exchange for campaign contributions from lenders — or, better still, those who have steadfastly resisted campaign finance reform.”
How much has PDL paid in campaign contributions?
JohnnyUtah:
Thanks for your comments, but they demonstrate massive holes in logic.
“It is just a coincidence that people of color are poor?”
I don’t know, because Whites are poor, too. Have a look at the chart labeled “Personal Income by Race” at this link:
http://en.wikipedia.org/wiki/Personal_income_in_the_United_States
The chart was culled from U.S. Census data
Seems to me that it’s just life. Don’t you? Or do you have a conspiracy theory to share?
“and just another coincidence that payday companies just end up giving them loans?”
Well, of course they are being given loans. So are Whites. And the CRL’s “study”, the methodology of which I’ll reiterate is not available, omits that information.
So these two questions do not change either my conclusion, nor supports the CRL’s.
“How much did you earn last year off the backs of the poor? 25000- 50,000?”
This is a Straw Man argument as well as a inaccurate moral judgment, Johnny. First, it asserts that “only” payday lenders generate revenue from this income demographic. Have you asked how much McDonald’s made of this same income demographic? How much damage did people do to themselves by eating fast food? Have you asked how much the local liquor store made off this demographic? How much damage was done there? In addition, it posits a false moral judgment, that “making money off the backs of the poor” is wrong (which begs the question — should services be provided for free?).
So there goes that argument out the window.
As for what I made, it’s not only none of your business, it’s irrelevant.
But what if it was $1? Would that change your opinion? $5 $100 $1000, $1,000,000? What is the JohnnyUtah Moral Threshold for “making money off the backs of the poor” that is acceptable?
The answer would rightly be, “None”, because any one that you set is by its very nature arbitrary.
I am, and have fully disclosed on many occasions, that I am (among other things) a financial journalist and an entrepreneur.
Not sure what you mean by “to refer to yourself as a journalist is stretching the word about far as it can go.” I suppose you feel the same way about, say, MSNBC?
Regarding the NY Times article by Mr. Frank, the portion you cite, “Evidence suggests….” What evidence? From who? From where? There is no source, which means he made it up. I should know. I”m a journalist. We do that sometimes.
Does your comment regarding journalism apply to Mr. Frank as well?
“This evidence recently led Congress to cap the annual interest rate on payday loans to military personnel at 36 percent.” (Frank)
False. First, this “Evidence” doesn’t exist as noted above. Second, if you had done your researrch, you would find the two-page report from the DOD which blamed NON-SPECIFIC CREDIT as sources of distraction for deployed military. Payday loans are NEVER mentiioned in the report.
“How much has PDL paid in campaign contributions?”
I don’t know. Why don’t you do some journalistic research and look it up. Why you’re at it, why not look up how much money BANKS have contributed to state and federal legislators to attempt to pass laws banning payday loans?
Because, if you’ve done your research, you’d learn that banks profit big time from NSF and overdraft fees…..the only form of short-term credit that would be left available.
http://seekingalpha.com/article/127719-fdic-payday-loans-a-superior-form-of-short-term-credit
Try again, Johnny. I’ll be waiting.
Just for the sake of argument, in looking at the their research I see that it does explain their data and methodology later in the report. It’s omitted if you just read the executive summary, but it’s in the full report.
http://www.responsiblelending.org/pdfs/predatory-profiling.pdf
Thanks, once again, for your post, Lawrence. CRL needs to be exposed.
According to Veritec Solutions LLC, a regulatory services company, the Center for Responsible Lending misinterprets data to come to flawed conclusions. Veritec is concerned that certain conclusions derived in the CRL Report are a misinterpretation of statistical information and that the conclusions inaccurately reflect the effectiveness of state regulatory programs in Florida, Oklahoma and other states.
Reports from the Center for Responsible Lending purposely deceive consumers and policymakers by using “evidence” that simply does not exist. CRL takes data points from various sources, applies their own convoluted math and passed it off as information confirmed by state regulators and third parties.
At 36% APR, you’re earning $1.38 per hundred, per fortnight whether you’re a bank or a payday lender, whether the loan is long term or short term. So how do banks do it, often at a much lower rate?
They do it because they are not making two-week loans, Erik. Payday loans are for two-weeks. The loans that banks make are for years and for balances that far exceed the $400 average of a payday loan.
Bank loans are also secured by collateral, so if they underwrite properly, their default rate will be negligible and they’ll collect principal and interest. If they do default, they are generally made whole.
Payday loans are unsecured. The default rate is about 6%. That’s 6% of principal right off the top of any interest they collect.
You’ll notice that when banks did not underwrite properly, the default rate went into the stratosphere, and many of them have gone under or are in serious trouble.
I commend you for your tasteful and educated replies as not many have the ability or capacity to do so.
The Center For Responsible Lending and all of its innocent glory always claims to advocate for the protection of consumers. They lobby as if they’d have much to gain from the abolition of payday loans and nevermind consumer rights and the right as Americans to patronize companies that are conducting business well within the limits of the law. If an individual doesn’t think payday loans are a sound choice for their particular situation then it should be as simple as not using them. Payday loan rates often appear high because regulatory measures force them to state a two week product in annual terms. Of course, in such cases a customer would have to take out a payday loan EVERY two weeks non-stop for an entire year. Why aren’t political figures and “consumer advocates” rallying in favor of presenting the interest as the actual term of the loan instead of a fictitious APR? Because those who are against the industry will never be happy with any measures that are taken and certainly don’t want the industry to be “legitimized” because they stand to gain from illegitimacy.
The introduction of a 36% interest rate would not only destroy the industry in its entirety but would also put tens of thousands of people out of work in an already distressed economy. That would mean anyone who works for a short-term lender, installment lender, pawn shop, or title lender. It may also effect any tax service that offers refund advances.
It’s ok Ray! We used that site and if really is yours thank you.
[…] motive likely lies in Faith’s link to the corrupt Center for Responsible Lending. Self-Help, the credit union behind CRL, and therefore behind Bill Faith, stands to gain by picking […]
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