CRL research shows that payday loans drain $3.4 billion a year from consumers. Further, CRL has long held that the payday industry relies upon customers who cannot repay their loans.
Now, with CFPB releasing an item from ACE Cash Express’ training manual, that contention is proven to be true. The ACE graphic shows how the business model intends to create a debt cycle that becomes increasingly difficult to break and urges its associates to be aggressive.
Across the country, the South has the highest concentration of payday loan stores and accounts for 60 percent of total payday lending fees. Missouri is the only state outside of the South with a comparable concentration of payday stores.
Last year, another large payday lender, the Fort Worth-based Cash America International, faced similar enforcement actions when CFPB ordered it to pay $5 million in fines for robo-signing court documents submitted in debt collection lawsuits. Cash America also paid $14 million to consumers through one of its more than 900 locations throughout the United States, Mexico and the United Kingdom.
On the same day that the CFPB’s enforcement action occurred, another key payday- related development occurred.
Missouri Gov. Jeremiah “Jay” Nixon vetoed a bill which purported to be payday reform. In part, Governor Nixon’s veto letter states, “allowing payday lenders to charge 912.5 percent for a 14-day loan is not true reform…Supporters point to the prohibition of loan rollovers; but missing from the legislation is anything to address the unfortunately all-too-common situation where someone living paycheck-to-paycheck is offered multiple loans by multiple lenders at the same time or is encouraged to take out back-to-back loans from the same lender…This bill cannot be called meaningful reform and does not receive my approval.”
Speaking in support of Gov. Nixon’s veto, Pastor Lloyd Fields, a Kansas City minister, added, “The faith community applauds Gov. Nixon’s moral leadership in holding lawmakers to a higher standard on payday lending reform. Missourians deserve nothing less.”
On the following day, July 11, the Federal Trade Commission fined a Florida-based payday loan ‘broker’ $6.2 million in ill-gotten gains. According to FTC, the firm falsely promised to help consumers get payday loans. After promising consumers to assist them in securing a loan in as little as an hour, consumers shared their personal financial data. However that information was instead used to take money from consumers’ bank accounts and without their consent.Speaking on behalf of the FTC, Jessica Rich, Director of FTC’s Bureau of Consumer Protection said, “These defendants deceived consumers to get their sensitive financial data and used it to take their money. The FTC will continue putting a stop to these kinds of illegal practices.”
Looking forward, CFPB’s Cordray also sees a need to remain watchful of payday developments.
“Debt collection tactics such as harassment and bullying take a profound toll on people—both financially and emotionally,” said Cordray. “The Consumer Bureau bears an important responsibility to stand up for those who are being wronged in this process.”
(Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org)
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