The Factory of Dreams is where non-profit “consumer advocacy organizations” with noble-sounding names go to manufacture “studies” made of out of unicorn hair, rainbow glitter, and pink marshmallow Peeps. In other words, anytime you see a “study” released by an entity called The Insight Community Center for Community Economic Development, you can be certain this “study” is nothing other than pure fiction.

I’m not kidding. Its contents are not documentarian in any way. It is complete fabrication. If a student at a college attempted to publish this as a dissertation, he’d be expelled. Were the statutes for fraud broad enough, the Insight Center would be indicted. What they’ve produced is a disgrace.

It is all the more appropriate that Insight’s “The Net Economic Impact of Payday Lending in the U.S.” was released on April Fool’s Day. The “study”, authored by Tim Lohrentz, literally defines a job as not being an actual job, in order for the study to justify that payday lending causes jobs to be lost. It claims that money spent into the economy is not actually spent into the economy but, in fact, just vanishes. Its fabricated conclusions are intended solely to demonize payday lending in order to drive the credit product out of business. This comes even as Insight claims its mission is to “create lending alternatives to payday lending”. Were that true, perhaps it would spend its $2.6 million in annual contributions towards actually creating a new lending product, rather than trying to destroy another one.

I want to be clear that this “study” is based on a set of provably false assumptions. Consequently, its conclusions are fruit of the poisonous tree. There is no need to address the “study’s” mathematics because everything leading to the math is fiction.

Unicorn Hair: When Money Spent Into the Economy Isn’t Spent Into the Economy

Lohrentz and his band of elves pluck the hairs from a unicorn by claiming that, “…the credit itself…is essentially a zero sum arrangement: the principal is due back just two weeks later, so the net impact of the principal on the economy is virtually zero”.


The credit is transferred from lender to borrower, and from borrower to vendor (goods and services, i.e. the economy). Two weeks later, money is transferred from employer to borrower (in exchange for work), and from borrower to lender. The economy thus ends with a net credit.

Nor does the interest paid to the lender simply vanish. It is returned to the economy either in the form of A) payments to the lender’s employee or vendors, B) reinvestment into the business, or C) profit share to the lender, which he subsequently spends or invests into the economy.

It is not a zero-sum game, unless you believe in unicorns. Thus, the “study’s” attempt to nullify the positive effects of credit spent into the economy fails.

Rainbow Glitter: When A Job Isn’t Actually A Job But Counts As One

In the real world, a job is actually a job. That’s where a real person goes to work, does real work, gets paid real money, and returns to their real home.

You know, a job.

Lohrentz desperately wants to prove that payday lending destroys jobs. Instead, he creates a spiral of false assertions, none of which have any evidentiary support whatsoever, in order to manufacture a definition of a “lost job”.

“The logic of the economic model is that there while there might not be a formal job lost directly to a household as a result of interest payments made to payday lenders, the household does have less income. The loss in income could mean that in some househoulds a household member will add some hours on a first or second job in order to make up the difference of losing income as a result of interest payments made to payday lenders. This means that this household member has less time available to take care of household tasks. This is the equivalent of losing a portion of a household job, which means a lowering of quality of life”.

Having now “defined’ a “lost job”, he places a monetary value on each “household job” and – voila! – jobs have been lost as a result of interest payments to payday lenders.

I will now parse this paragraph so we are all on the exact same page of Lohrentz’s fantastical storybook:

“The logic of the economic model is that there while there might not be a formal job lost directly to a household as a result of interest payments…”

Translation: Lohrentz cannot possibly show a job gets lost through interest payments if the real world definition of a job is used. So he makes something up.

“…. the household does have less income.”

Translation: The household actually doesn’t have less income. The amount of money the household earned is defined as income. So Lohrentz just changes the definition of income.

“The loss in income

    could mean

that in some households a household member will add some hours on a first or second job in order to make up the difference of losing income as a result of interest payments made to payday lenders.” [Emphasis added]

Translation: Lohrentz has absolutely no data whatsoever to support this assertion. He has none. The study has none. None exists. Anywhere. That’s why he wrote, “could mean”.

“This means that this household member has less time available to take care of household tasks.”

Translation: Lohrentz is hoping you bought into the previous unsupported sentence so this doesn’t appear as the fallacious logic it is.

“This is the equivalent of losing a portion of a household job”

Translation: So a job is not actually a job. Ta-Da!

Thus, the conversion of interest payments into job loss is false, rendering all numbers derived from this methodology null and void.

Marshmallow Peeps: When Credit Need Isn’t Actually Credit Need

Lohrentz’s other assertion is that if interest payments weren’t made to those evil payday lenders, that the money would go to the purchase of goods and services in the community. That happens to be an accurate statement. Regrettably, it is made in a vacuum, because Lohrentz does not consider that a need for credit exists in the first place, and that’s why a household even uses a payday loan! Somebody needs money to fix a car, pay a doctor’s bill, to keep the electricity on, or fly to visit Grandma.

The need for credit exists. That credit will be obtained somewhere. It might be from a friend or relative or credit card cash advance or pawnshop or installment lender or auto title loan or by paying a disconnect fee or paying a bounced check fee….but the credit will be used and paid for. Lohrentz’s conclusion only makes sense in context with other choices. Furthermore, borrowers make a conscious choice to use a payday loan over all these other choices. People chose this product because it fits them. It’s a market solution. If you remove it, they’re going to pay more. Period. This is simple economics.


Lohrentz claims an increase in bankruptcies as a result of payday loans, yet he fails to acknowledge two important facts. First, payday borrowers face self-induced financial difficulties, independent of payday loans. These households have poor credit histories, do not pay bills on a timely basis, bounce checks, change jobs, and relocate often. This population is thus more likely to experience bankruptcy independent of payday lending, yet Lohrentz’s “study” does not provide a control group against which a comparison can be done. Further, Donald Morgan’s study out of the New York Federal Reserve, “Payday Holiday”, demonstrated that in states where payday was banned, more bankruptcies occurred.


This “study” does not contradict the study by IHS Global Insight in 2009. One does not get to create fiction, compare it to reality, and then proclaim superiority. The only thing Insight’s “study” contradicts is the reality of the 40,000 lost direct, indirect, and induced jobs in the payday loan industry, thanks to nitwit activists like those at Insight, pushing their flawed ideologies on self-aggrandizing legislators.

Those are 40,000 real people who lost 40,000 real jobs, who lost hundreds of millions of dollars in real income that no longer gets spent into the real economy, resulting in real time spent filling out unemployment paperwork and real suffering.

So riddle me this: if Insight claims it wants to create alternatives to payday lending, why not use its $2.6 million in annual contributions to actually create those alternatives? Why not create a free market solution? Why not create a business or help fund others that are creating them? I receive calls on a weekly basis from start-ups looking for funding for alternative solutions. These are real businesses with real solutions. Why does Insight seek to destroy the lives of people with real jobs – not ones defined as “household tasks” – by putting them out of work through legislative efforts?

Why isn’t Lohrentz, who claims he has “15 years of community economics and business development experience, ranging from Central America and West Africa to Chicago, communities of color, and immigrant communities in the U.S.” putting his talents to work on a free market solution?

Maybe because he’s one of the recipients of the $1.1 million in “other salaries” paid by Insight that are curiously un-itemized in the organization’s Form 990 IRS filing?

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