So The Center for Responsible Lending has declared today as a â€œNational Day of Action to Stop Payday Lendingâ€.
So I am declaring today as a â€œNational Day of Action to Stop Mercenary Activist Organizationsâ€.
The Center for Responsible Lending purports to â€œprotect the consumerâ€ by advocating for governmental bans on short-term credit, but instead forces consumers to credit choices they have already rejected, costing them more in the process.
There are at least two obvious motives for the CRL. First, it apparently seeks to perpetuate its relevance as a â€œconsumer championâ€, solidifying over $7 million in annual contributions and grants, from which its employees draw salaries. Second, it apparently seeks to remove competitors from the marketplace, as its affiliate organization, the Self-Help Credit Union, poaches customers after killing the competition.
Thus, the CRL can attack payday lenders and many other credit providers, literally destroy their businesses, put thousands of Americans out of work, cause tens of millions of dollars in labor income, and millions in state GDP and tax revenue, to evaporateâ€¦.yet its employees will keep their jobs, their incomes, and be able to support their families.
Why Payday Loans Exist
There is a need for short-term credit in America. In 1990, people had few options, so they usually would bounce a check at a cost of $50-$60 per check, which would often trigger multiple checks bouncing. Payday loans appeared in 1990 to offer a less expensive option.
There are now many options for short-term credit, of which payday loans are neither the most nor least expensive. Here is a list, with national average cost per hundred dollars borrowed:
Borrow from a friend/employer ($0)
Credit Card Advance ($1)
Installment Loan ($3 – $8)
Title Loan ($8 – 10)
PDL ($15 – 23)
Online PDL ($25 – 30)
Utility Disconnect Fees ($40)
Bank overdraft fees ($60)
Loan Shark (no maximum)
A GWU survey demonstrated a 90% satisfaction rate with PDLs. The Better Business Bureau fielded only 3,300 PDL complaints nationwide in 2012 over one hundred million transactions, for a 0.0033% complaint rate. Any stateâ€™s DMV complaint rate is likely higher. The alleged â€œcycle of debtâ€ is a myth. CRL likes to claim that the average loan is renewed 8 times. Not only does state reporting data dispute that claim, but SEC filings of public companies show that 94% of all loans are paid back on time, and total revenue comes in at 1/8 of what would have to be under CRLâ€™s theory.
History and Funding of the CRL
The CRL was founded in 2002, serving as the public relations arm of the Self-Help Foundation , a vast, multi-pronged organization. Self-Help has created a multi-million dollar profit center , partially by poaching customers from other alternative financial service providers, which the CRL attacks, apparently to shut them down.
The CRL routinely issues biased studies with faulty methodologies and pre-determined conclusions in order to appear academically credible. Meanwhile, multiple studies have demonstrated that CRLâ€™s activism has made things worse for consumers. This includes the seminal study out of the New York Federal Reserve, â€œPayday Holidayâ€, the author of which has also determined that payday loans are not â€œpredatoryâ€.
The result of CRLâ€™s advocacy has not only harmed consumers, it has cost thousands of jobs, a side effect conveniently ignored by CRL. Fortunately, IHS Global Insight and public SEC filings from public companies permit the quantification of CRLâ€™s job killing and wealth destruction advocacy : 31,886 direct, indirect and induced jobs lost, along with $1.365 billion in lost wage income, and the loss of $1.812 billion in gross state product. Nor does CRL reveal the amount of money borrowers in these states spent on other credit products they were forced to use instead of payday loans.
I have challenged CRL on multiple occasions, publicly and privately, asking them to respond to specific questions regarding their advocacy. Their response is typical of activist organizations: they deflect the question or remain silent. The reasons are obvious: the facts are not on their side. The CRLâ€™s entire reason for existence would implode if they permitted direct challenges to their attacks on the short-term credit industry. Thus, it maintains strictly unidirectional communication â€“ making proclamations to the press, the public, and politicians, but never answering direct questions. Instead, it provides ad hominem attacks on any person or entity that challenges the CRLâ€™s position.
The CRL Has No Risk
The CRL has no risk in conducting its witch-hunt. With its non-profit status and earnest name, it begins from a place of emotional credibility. It does not rely on making a profit, so there is no revenue stream to protect. In order to perpetuate the flow of grants and contributions into its own organization, the CRL must continually place the livelihoods of workers in the payday loan industry, and those who provide support services, in eternal jeopardy.
There is only one way to prevent the CRL from continuing its agenda of credit restriction, wealth destruction, job assassination, and tyranny over the free market.
They must be held accountable.
Whether via New Media or MSM, itâ€™s time journalists did the following:
How about a story on the CRL itself? Why does it actually exist? How about a story on how the CRL and its affiliate, the Self-Help Credit Union, conspired to kill payday lending in North Carolina, so they could capture that customer base? How about an inquiry into Self-Helpâ€™s financial statements? What percentage of its revenue comes from overdraft fees? Who exactly are the â€œpolicy analystsâ€ at CRL? What qualifications to analyze policy and data do Leslie Parrish and Uriah King actually have? They do not appear to have any background whatsoever in economics, business, statistics, or government. So why are their â€œstudiesâ€ given any credibility given their flaws and biases? Why do they publish studies with inflammatory titles based on race? What ties does the CRL have to legislators? How about a story about the disturbing subtext to CRLâ€™s advocacy? Does any reporter want to ask why the CRL wants to eliminate freedom of choice? Why does the CRL want to control peopleâ€™s decisions? How about asking why the CRL never answers any challenges it receives, other than attacking those who dare challenge them?
Note to newspapers: only 4% of your readers even know what a payday loan is. Why not cater to the 96% that donâ€™t, and begin an investigative series into the CRL? I can guarantee that eyes roll every time a newspaper prints another â€œevil payday lenderâ€ story.
Itâ€™s time to hold the Center of Responsible Lending accountable for its actions: Stripping hardworking Americans of their free and conscious choice to use the credit product they wish, killing tens of thousands of jobs, all the while lining its own pockets.