Nashville, TN: Field Hearing on Payday Loans

Good morning, and welcome to the Consumer
Financial Protection Bureau’s Public Field Hearing in Nashville, Tennessee. At today’s
Field Hearing, you will hear Director Richard Cordray and a panel of distinguished experts
discuss payday lending issues. My name is Cheryl Parker Rose, and I am the Assistant
Director for the Office of Intergovernmental Affairs at the Consumer Financial Protection
Bureau, or the CFPB. The CFPB’s mission is to help consumer finance
markets work by making rules more effective, by consistently and fairly enforcing those
rules, and by empowering consumers to take more control over their economic lives. Our
audience today includes elected officials, community leaders, advocates, industry representatives,
and of course, consumers. We are pleased to welcome State Representative Brenda Gilmore
and staff from the offices of Congressman Jim Cooper. We are also honored to be joined
by Attorney General Bob Cooper, whom you will be hearing from shortly. I will spend a few moments telling you about
what you can expert at today’s event before we get started. First, you will hear welcoming
remarks form Attorney General Cooper. After his remarks, the CFPB’s Director, Richard
Cordray, will provide comments about payday lending issues. David Silberman, CFPB’s Associate
Director for Research, Markets, and Regulations, will then lead a panel discussion to discuss
payday lending. Following the panel discussion, there will be an opportunity to hear from
audience participants. The audience participation portion of the public meeting provides audience
members with the opportunity to share their response to today’s discussion and to share
consumer finance practices and trends in their communities. The audience participation portion
will be moderated by Zixta Martinez, CFPB’s Associate Director for External Affairs. Today’s public meeting is being live-streamed
at You can also follow CFPB on Twitter and Facebook, #paydayloans. So let’s get started. I’d like to begin by
introducing Tennessee’s Attorney General Robert E. Cooper Jr., who was sworn in as Attorney
General for the State of Tennessee on November 1st, 2006. He was appointed by the Supreme
Court to serve an 8-year term. The Attorney General’s office has achieved many notable
accomplishments during General Cooper’s tenure, including obtaining a default judgment of
almost $11 million against a nationwide group that targeted Fort Campbell soldiers with
predatory sales and lending practices; taking action against a national electronics product
company, alleging the company targeted at least 4,500 primarily low-income Tennessee
consumers with high-pressure sales tactics and failure to disclose key contract terms;
and also the creation of a foreclosures working group comprised of state agencies that file
suit against foreclosure rescue operations in Memphis. Attorney General Cooper, the floor is yours. [Applause.] Cheryl, thank you for that introduction, and
thank you also for this opportunity to welcome Director Richard Cordray and his team from
the Consumer Financial Protection Bureau to Tennessee as well as this great crowd and
the distinguished panelists we are going to hear from today. Now, I have trouble calling Rich Cordray “Director,”
because I know him as “General.” I had the privilege of serving with Rich when he was
Attorney General of the great State of Ohio, and I will tell you that he was a real leader
in our National Association of Attorneys General. In our association, you learn a lot about
your colleagues, and one thing I learned about Rich in addition to all the great things he
was going in Ohio was that in 1987, he was the undefeated five-time champion on Jeopardy
and won $43,000. So when he first ran for public office, his bumper stickers said, appropriately,
“The answer is Richard Cordray.” [Laughter.] Now, as far as the Consumer Financial Protection
Bureau is concerned, the answer is still Richard Cordray. The President could not have found
a better director to get the Bureau off the ground. Richard’s former AG colleagues were delighted
at his appointment, because we all share the same challenging mission to make the market
for financial products and services work for consumers, whether they are applying for a
mortgage, choosing among credit cards, considering an education loan, or using any number of
other consumer financial products. This means ensuring that consumers get the information
that they need to make the best financial decisions for themselves and for their families,
that prices are clear up front, that risks are visible, and that nothing is buried in
the fine print. Now, in markets that work, consumers should
be able to make direct comparisons among financial products, and no provider should get away
with unfair, deceptive, or abusive practices. This is critical work, and Rich and his team
at the Bureau are doing a great job at it. Let me mention one important effort by the
Bureau that we are also pursuing here in Tennessee. Last year, the Bureau released policy recommendations
that advocate greater financial education for our youth. Here in Tennessee, we have
been leading the way in that area. In 2006, Tennessee passed a law requiring high school
students to take a personal financial course before they could graduate. The course is
designed to help students understand the real-world impact of their financial decisions. The topics
covered include income, money management, spending and credit, and saving and investing.
As part of the law, teachers are required to attend training classes in personal finance,
and my office participates in that training by giving presentations on consumer protection
laws as part of the Tennessee Jump$tart Coalition, which is a non-for-profit group that promotes
financial literacy among our youth. Now, don’t misunderstand me. My office and
the Bureau work hard to help the victims of predatory business, but there is no substitute
for a savvy consumer who knows exactly what questions to ask and therefore never becomes
a victim. So it’s important to start young and to educate consumers before they get that
first credit card or first loan. Rich and the CFPB staff also realize that
some government regulations, shall we say, can be difficult to understand; therefore,
the Bureau is committed to making its own regulations and guidance as clear and streamlined
as possible, so that providers of consumer financial products know exactly what is expected
and can structure their practices accordingly. This meeting today in Nashville is part of
the Bureau’s mission to get the word out about the Bureau’s work and to hear from consumers
and industry about the challenges that they face in today’s financial marketplace. Before closing, I would like to point out
that this is not the first visit by the Bureau to Tennessee. We have been fortunate to have
Assistant Director and head of Servicemember Affairs, Holly Petraeus, here several times.
She has been to Fort Campbell and Clarksville and met with the State Attorneys General for
Tennessee and Kentucky there, and we also accompanied her to the 164th Wing Command
and the Millington Naval Support Base in Memphis, and this has been part of her tour of military
installations across the nation to learn more about consumer issues as they impact our servicemembers.
And just a year ago, Ms. Petraeus came to Nashville for a forum on protecting servicemembers
and their families, a forum that includes Attorneys General from all over the South.
We appreciate her help and our efforts to protect our servicemen and -women and their
families from consumer fraud. There are many people, as you heard, who are
here today who have important things to say on this subject, so I am not going to take
any more time except to reiterate my thanks to Rich and to the Bureau for being here and
to let everyone attending today’s proceedings to know how important it is that they are
willing to share their experiences about what is working and what is not working in the
financial marketplace and how it can be improved. So thank you again for being here. [Applause.] Thank you, General Cooper. I am now pleased to introduce Richard Cordray.
Prior to his current role as the CFPB’s first Director, he led the CFPB’s Enforcement Office.
Before that, he served on the front lines of consumer protection as Ohio’s Attorney
General. In this role, he recovered more than $2 billion for Ohio’s retirees, investors,
and business owners, and he took major steps to help protect its consumers from fraudulent
foreclosures and financial predators. Before serving as Attorney General, he also served
as an Ohio State Representative, Ohio Treasurer, and Franklin County Treasurer. Director Cordray. [Applause.] Thank you, Cheryl, and my thanks to Attorney
General Cooper, who I was privileged to serve alongside when I was the Attorney General
in Ohio. I have come to think of Ohio and Tennessee, General, as neighboring states.
I know that Kentucky is actually in between, but I understand that historically, Tennessee
was the 16th state in the Union in 1796, and Ohio was the 17th in 1803. So I was always
pleased and not at all bashful about borrowing from Bob, things that he had been doing in
Tennessee and bringing them to Ohio. I also have found that Columbus and Nashville seem
to have a lot in common. I know that although I’m not a hockey expert myself, that the Predators
and the Blue Jackets now duke it out on the ice regularly, and there’s much in common
between these two state capitals. And we’re just very, very pleased to be with you here
today, and we thank Nashville for a warm welcome in this splendid venue here, a tribute to
the country music phenomenon that is very popular in my home state of Ohio and throughout
the country. Today, we are releasing a research study on
payday loans. We chose this part of the country to release this study because of the prevalence
of payday lenders both here and in many of the neighboring states, including, in my view,
Ohio. Congress has charged the Consumer Financial
Protection Bureau with the dual responsibility for assuring that consumers have access to
financial services and making sure that the market for those services are fair, transparent,
and competitive. In particular, we envision a marketplace where both consumers and honest
businesses can benefit from reliable small-credit lending. Payday loans were developed to provide small
loans to consumers to meet a short-term need. Consumers who take out these loans are usually
required to repay them from their next paycheck. Payday lending as we know it originated in
the 1980s and 1990s, when a number of state legislatures were persuaded to create a special
exemption to their state usury laws that established a new framework for small-dollar lending.
Under the protective umbrella of that new exemption, payday lending has spread and grown
rapidly over the past two decades. Today, payday loans are readily available online
and in many states through storefronts as well. According to reports from industry analysts,
over 12 million American adults are currently choosing to borrow money through payday loans. For consumers in a pinch, getting the cash
they need can seem worth it at any cost. Many consumers would never dream of paying an annual
percentage rate of 400 percent on a credit card or any other type of loan, but they might
do it for a payday loan where it feels like they can get in and get out very quickly.
People often are responding to circumstances they view as presenting an emergency that
requires immediate access to money. In fact, the core payday loan product was
designed and justified as being expressly intended for short-term emergency use, but
our study today again confirms that payday loans are leading many consumers into longer-term,
expensive debt burdens. Our research confirms that too many borrowers get caught up in the
debt traps these products can become. The stress of having to re-borrow the same dollars
after already paying substantial fees is a heavy yoke that impairs a consumer’s financial
freedom. Today’s report is based on data drawn from
a 12-month period that represents more than 12 million storefront payday loans. It is
a continuation of the work we did last year in our report on payday loans and deposit
advance products, which was one of the most comprehensive studies ever undertaken on this
market. In last year’s report, we studied the number
of loans that borrowers take out over the course of the year and the length of time
that borrowers are in debt over the course of that year. We found that too often payday
consumers are getting caught in a revolving door of debt. Today’s study builds on our prior research
and digs deeper into payday loans with even more analysis behind the numbers. We look
at new payday loans and examine how often borrowers roll over the loans or take out
another loan within 14 days of paying off the old loans. We did this because we consider
these subsequent loans really to be renewals that are part of the same loan sequence. What
we mean is that the subsequent loans are prompted by a single need for money; that is, the follow-on
loans are taken out to pay off the same initial debt for the consumer. Maybe that consumer
took out the loan to pay for a car repair, or maybe she took it out to pay for an unexpected
trip to the hospital, or maybe she was just short some of the money needed to get by at
the end of the month. Whatever the reason, the loan sequence comprises all of the renewal
loans that the consumer took out to pay for the costs incurred from or made unaffordable
by that initial need. Our study today is the most in-depth analysis
to date of this pattern. Another way of stating the matter is that our central concern here
is not with every payday loan made to a consumer. Preserving access to small-dollar loans means,
after all, that some such loans should be available. Our concern instead is that all
too often those loans lead to a perpetuating sequence. That is where the consumer ends
up being hurt rather than helped by this extremely high-cost loan product, and it is well known
that payday loans often lead to this damaging result. Our report today further documents
this concern in much greater detail. Our research found that for about half of
all initial payday loans, those that are not taken out within 14 days of a prior loan,
borrowers are able to repay the loan with no more than one renewal. However, we also
found that more than one in five initial loans that are made result in loan sequences involving
seven or more loans. With a typical fee of 15 percent for each payday loan, consumers
who renew their loans seven times or more will have paid more in fees alone than the
amount they originally borrowed. For these people, the piling up of fees eclipses the
actual payday loan itself. Moreover, when we looked at the 14-day windows
in the states that apply cooling-off periods to reduce the level of same-day renewals,
the renewal rates are nearly identical to states without these limitations. This renewing
of loans can put consumers on a slippery slope towards a debt trap in which they cannot get
ahead of the money they owe, and this tells us that even if state law precludes consumers
from taking out another payday loan immediately, on the spot, the pressure of their circumstances,
now intensified by the heavy expense of the payday loan itself, tends to force consumers
to find their way back to the payday lender about as soon as the law permits. As for the amounts that people are borrowing,
we found that in four out of five loan sequences in which borrowers renew the loan, they end
up borrowing the same amount or more, sometimes again and again. So because they rolled over
their loans, they ended up owing as much or more on their very last loan as the entire
amount they had borrowed initially. Tragically, these consumers find that they are simply
unable to make any progress in reducing the debt over time. Most telling, the study found that four out
of five payday loans are rolled over or renewed within 2 weeks, and that roughly half of all
loans are made to borrowers in loan sequences lasting 10 or more loans in a row. From this
finding, one could readily conclude that the business model of the payday industry depends
on people becoming stuck in these loans for the long term, since almost half their business
comes from people who are basically paying high-cost rent on the amount of their original
loan. These are not just abstract numbers. They
reflect the circumstances of people across the United States who are running into trouble
with payday loans. Several thousand have submitted complaints to the Consumer Bureau because
they have gotten caught in these spider webs of debt. Since we started taking payday loan
complaints in November of 2013, just 4 months ago, we have already heard from thousands
of consumers across the country. Some consumers have told us about circumstances in which
a payday loan proved beneficial to them, but others have told us a very different story. Take Lisa from Pennsylvania, who submitted
a complaint to us after taking out a payday loan. Lisa told us she lost her job at a local
hospital and went to a payday lender to help pay her rent. She meant to take out the loan
for a short amount of time. She thought she would be able to get in and get out of the
loan very quickly, but she ended up rolling it over. She also took out a second loan to
pay for the first loan. In total, she says she took out $800. Today, despite having paid
back more than $1,400, she still has not entirely paid off the loans. Now she is trying to turn her life around.
She tells us she’s taking classes, holding down two jobs, and moving in with her parents
to save money. Yet the struggle continues. “It caught me totally off guard,” she said.
“I got stuck in a cycle.” Her information eventually got sold to a debt collector, and
now she tells us she is getting called five times a day. Lisa’s story is all too common.
She thought she could get in and out of the loan but ended up spiraling downward in debt.
She slipped on the steep slope and just kept on sliding. Our study also looked at payday borrowers
who are paid on a monthly basis. It found that many payday borrowers fall into this
category, such as elderly Americans on disability or disability recipients on fixed incomes.
A fair number of them remained in debt for the entire year of our study the entire year
living for all practical purposes with a high-cost lien against their everyday life. Indeed, of the payday borrowers who were receiving
monthly payments, one out of five borrowed money in every single month of the year. These
borrowers, which includes those who receive Supplemental Security Income and Social Security
Disability or retirement benefits, are thus in serious danger of ensnaring themselves
in a debt trap when they take out a payday loan. This fact is of great concern to us. Evelyn, an 81-year-old woman from Texas, had
to deal with this very situation. Evelyn told us she had never taken out a payday loan in
her life until she needed to pay for her dying daughter’s cancer medicine. She saw an ad
on TV and on a Saturday morning went down to her local payday storefront to take out
$380. She was hoping her daughter would get well and pay back the money herself, but the
cancer took away her daughter just a few months later. Evelyn, on a fixed income that combined
her widow’s pension and Social Security checks, tried to pay back the loan bit by bit, but
every time she hit her due date at the beginning of the month, she had to renew the loan because
she did not have the full amount plus the new fees. As the many months passed, Evelyn’s
outstanding balance grew to be more than $700. These kinds of stories are heartbreaking,
and they are happening all across the country, even in states that have adopted mandatory
cooling off periods and other regulations. They demand that we pay serious attention
to the human consequences of the payday loan market. In January 2012, we added payday lenders to
our program of supervising financial institutions. It was, in fact, one of the first things we
did after I took over as the Director of the Consumer Bureau. Almost immediately, we decided
to hold a field hearing in Birmingham, Alabama, so that we could hear directly from stakeholders
about the costs and the benefits of actual consumer experience with this kind of small-dollar
loan, and we began to undertake our first closer study of these issues, which led to
last year’s report. Through our supervisory work, we have become
concerned about situations we have found where payday lenders have inhibited borrowers from
using company payment plans that are intended to assist them when they have trouble repaying
their outstanding loans. Moreover, we have found that some lenders use the electronic
payment system in ways that pose risks to consumers. These practices can hinder consumers
from getting out of debt or can leave them entirely unable to prioritize the payment
of their various debts in ways that would leave them better off. Our examinations also show that a troubling
number of these companies engage in collection activities that may be unfair or deceptive
in one or more ways. These activities that we have found include using false threats,
disclosing debts to third parties, making repeated phone calls, and continuing to call
borrowers after being requested to stop. The same is true for debt collectors that work
for payday lenders and that may fail to honor the protections that are afforded to consumers
through the Fair Debt Collection Practices Act. As we uncover these problems, we are
taking actions that require firms to comply with the law by changing their practices and
to make consumers whole for any harm they have suffered as a result of legal violations. The fundamental problem is that too many borrowers
cannot afford the debt they have taken on or at least cannot afford the size of the
payments required by a payday loan. In the end, consumers are at risk of using these
products in ways that go beyond their intended purpose. This concerns us at the Consumer
Bureau, and it should concern anyone who is focused on the payday market, because financial
products that trigger a cycle of debt are likely to disrupt the precarious balance of
consumers’ financial lives, leaving them worse off. We have also taken further steps to protect
consumers in this space. In an enforcement action against Cash America International,
we ordered one of the largest short-term, small-dollar lenders in the country to refund
consumers for robo-signing court documents in debt collection lawsuits. We ordered Cash
America to pay up to $14 million in refunds to consumers and levied an additional $5 million
fine both for these violations and for obstructing our examination team by destroying records
in advance of our arrival. We also sued a company named CashCall, along
with its owner, its subsidiary, and its affiliate, for collecting money that consumers did not
even owe. We believe the defendants engaged in unfair, deceptive, and abusive practices
in violation of the federal consumer financial laws, including illegally debiting consumer
checking accounts for loans that were void. The Bureau’s investigation showed that these
high-cost loans violated either licensing requirements or interest-rate caps or both
in at least eight states and perhaps more, which had the legal effect of either voiding
or nullifying the loans. Last fall, we released new guidelines to our
examiners who are supervising payday lenders on how to identify consumer harm and risks
related to Military Lending Act violations, and for the past year, we have been working
directly with the Department of Defense and other agencies to revise the regulations implementing
the Military Lending Act, with the goal of fulfilling the congressional objective of
ensuring more consistent protection of our servicemembers in the consumer financial marketplace. In sum, we are taking a variety of actions
in this space that address serious harms to consumers, and as we learn more about this
industry, we will remain vigilant to address other concerns as they are identified. The purpose of all this additional outreach,
research, and analysis on these issues is to help us figure out the right approach to
protect consumers in the marketplace for payday loans. We want to ensure they will have access
to a small loan market that is fair, transparent, and competitive. As we look ahead to our next steps, I will
frankly say that we are now in the late stages of our considerations about how we can formulate
new rules to bring needed reforms to this market. We continue to grapple with all aspects
of these issues. We have always acknowledged that the American consumer has shown a clear
and steady demand for small-dollar credit products, which can be helpful for the consumers
who use them on an occasional basis and can manage to repay them without becoming mired
in a prolonged and costly struggle. So we intend to make sure that consumers who can
afford to take out small-dollar loans can get the credit they need without jeopardizing
or undermining their financial futures, but we also need to recognize and todays study
underscores this fact that loan products which routinely lead consumers into debt traps should
have no place in their lives. Thank you. [Applause.] Thank you, Director Cordray. At this time, I would like to invite our panelists
to take the stage. While they are doing so, I will also take a minute to introduce two
of my CFPB colleagues, Corey Stone and David Silberman. Corey Stone is the Bureau’s Assistant
Director for the Office of Deposits, Cash Collections, and Reporting Markets. He came
to the Bureau after a career of consulting in entrepreneurship in the financial services
industry. David Silberman is the Associate Director for Research, Markets, and Regulations.
Prior to joining the CFPB in 2010, David served for 12 years as General Counsel and Executive
Vice President if Kessler Financial Services. David began his career as a law clerk to Justice
Thurgood Marshall. This morning, David will frame today’s discussion about payday lending
issues and introduce our panelists. David. Thank you, Cheryl, and good morning, everyone. Director Cordray has summarized for us the
findings of the new research report that the Bureau has released today, and I should say
that the full report is now available on our website,, and I would
encourage anyone who is interested to go there and read the full report. And the Director has also discussed some of
the implications and concerns that arise from that report, and he has raised questions about
how we can go about establishing, assuring access to a small-dollar credit market that
is fair, transparent, and competitive. So to discuss these and other questions, we are
joined by a distinguished panel. Let me briefly introduce them, and then we will turn it over
to them. They are seated, I should say, in alphabetical order. [Laughter.] To my far left is Pam Banks, Senior Policy
Counsel for Consumers Union. To her right is Lynn DeVault, a Board Member for Check
Into Cash, and to her right is Jamie Fulmer, Senior Vice-President of Public Affairs for
Advance America. Turning to the far right of the stage is Dr. Paige Skiba, Professor
of Law at Vanderbilt Law School, an economist on the law school faculty. To her left is
Stephen Reeves, Associate Coordinator of Partnerships and Advocacy for the Cooperative Baptist Fellowship,
and to his left is Oneshia Herring, Legislative Counsel for the Center for Responsible Lending. So we are going to ask each of the panelists
to make a brief statement of 2 to 3 minutes, and then we will be able to moderate a discussion
that Corey and Cheryl and I will facilitate with the panelists. So, Pam, why don’t you start. Good morning, Nashville. Good morning. Thank you to Director Cordray for inviting
me to participate in this important meeting, and as indicated, my name is Pamela Banks,
and I am Senior Policy Counsel for Consumers Union, the policy and advocacy arm of Consumer
Reports. Consumers Union works with over a million
activists to pass consumer protection laws in the states and in Congress. Our mission
is to work for a fair, just, and safe marketplace for all consumers, and to empower consumers
to protect themselves. We call out corporation that harm consumers, and encourage companies
that are heading in the right direction. Most importantly, we listen to consumers. We regularly
ask consumers about their experience in the marketplace. Payday loans are short-term loans that function
as an advance on one’s paycheck. While the loans are easily obtainable from a storefront
lender or online, they can be very, very difficult to repay. Generally, the loan must be repaid
in full, including interest and fees, from the consumer’s next paycheck, typically within
2 weeks. Since many of the applicants aren’t able to repay the loans when they are due,
they often are forced to roll over their loans for additional fees, and find themselves owing
much, much more than they originally borrowed. Consumers have complained to us about three-digit
interest rates, high fees, and unauthorized withdrawals from their bank accounts to pay
for payday loans. They have also told us how payday loans have increased their overdraft,
led to delinquency on other debt, and depleted funds for necessities, such as food, rent,
closing, and medical expenses. Consumers Union took a strong stance against banks making
deposit advance loans, very similar to payday loans, that trapped consumers into taking
out debt they can’t afford. We support federal guidelines that require banks to regulate
a consumer’s ability to repay a loan, without needing to borrow repeatedly from any source,
including reborrowing to meet necessary expenses. We also support limits on the number of loans
a consumer can take out in a year. We support requiring each deposit advance or payday loan
to be repaid in full before a subsequent loan is made, and we support banning automatic
credit increases. In addition, we support the guidelines set
out by the Military Lending Act, which caps interest rates on payday, auto title, and
tax refund loans to service members at 36 percent APR. We believe all Americans deserve
the same protections. Finally, in the States, we work with AARP,
the Coalition of Responsible Lending, and other consumer advocates in fighting for legislation
that would provide better disclosures, reduced fees, and capped interest rates on payday
lending. We look forward to working with the CFPB on this important issue, and I, personally,
look forward to reading today’s report. Thank you. Thank you, Pam. Lynn? Thank you, David. Good morning. My name is
Lynn DeVault. I’m President of Jones Management, which is an affiliate of Check Into Cash,
and, as David mentioned, I’m on its board of directors. Check Into Cash is a non-bank
financial service provider. We offer check-cashing, payday loans, title loans, money transfer,
prepaid cards, and almost anything that the consumer might need in their financial life.
Our company is based in Cleveland, Tennessee, and has more than 1,000 stores in about 30
states. Check Into Cash is a founding member of the Community Financial Services Association.
I have served on the board of directors there since 2000, and I was chair, proudly so, for
10 of the last 14 years. I want to thank the CFPB for asking me to represent the industry
on today’s panel. CFSA’s member companies represent more than
half of the state-regulated, licensed payday loan storefronts across the country. Over
the period that I’ve served on the board, we developed and we uphold a strict set of
best practices that contain certain consumer protections that exceed most of those contained
in state laws. These include, for example, a requirement to be licensed in every state
where one operates, and to follow every applicable state and federal law, to provide full disclosure
as required by TILA, to limit rollovers, to permit consumers to rescind a transaction
if they decide it’s not right for them, to follow appropriate collection procedures consistent
with Fair Debt Collections Practices Act, and possibly the most important best practice
which we offer is an extended payment plan at no charge, to anyone who finds that they
cannot repay their debt. As the Bureau examines and considers regulation
for the small loan industry, Check Into Cash and other members of CFSA remain available
to share what we’ve learned about our customers’ experiences, and how current state regulatory
framework can inform future federal policy. The individual and collective experiences
of our companies over the last 15 years have taught us that no product is one-size-fits-all.
CFSA members have used this information to institute important consumer protections,
and to work legislatively to expand and diversity state regulated small loan products. This
is evidenced in the best practices that we uphold and in our efforts, just this year,
to pass new installment legislation in nine states where none currently exist. Tennessee was the first state in the nation
to pass legislation regulating payday loans, and reforms have been made to those laws over
the years to establish important consumer protections. For example, in 2012, the state
legislature passed reforms that required all online lenders to be licensed with the state.
We’re working with our Tennessee legislators and our regulators to expand credit options
for consumers, enabling lenders in Tennessee to offer installment loans, which will allow
customers to repay their loans over a longer term. Many borrowers who currently use payday
loans may be better served or may prefer having a longer-term loan. We are pleased to see
the legislature considering the needs of these consumers. Tennessee is but one of the many states where
we’ve seen reforms and changes made into law. The small loan industry itself is very dynamic
and open to change. The companies that make up this industry are innovators and they know
their customers, and they seek to offer financial solutions to consumers who, for a variety
of reasons, choose our services over those of a traditional bank. I support a well-reasoned discussion, along
with key stakeholders, lenders, borrowers, and regulators on how we can better serve
and protect consumers. From that dialog, we should come to a better and more complete
understanding of how to provide access to credit in a variety of regulated products
within the envelope of appropriate consumer protection. First, I support causing all lenders
to register with CFPB, and second, I support codifying into rule the CFSA best practices,
which are not followed by many of the lenders in the industry. The demand for small-dollar, short-term credit
is deep and underserved by the banking community. A well-regulated, non-bank industry is a goal
we share with CFPB, and I look forward to continue to work toward that goal. Thank you. [Applause.] Thank you, Lynn. Next, Jamie Fulmer. Thank you, David, and thank you all for being
here today. I appreciate the opportunity to be with you to share my thoughts on the complex
issues of access to cost-competitive, regulated, and transparent credit. Collectively, Lynn
and I bring the unique perspective of almost 30 years of serving our customers in our stores
across the country. Let me just say that I’ve met thousands of our customers in that time,
and they’re decent, hard-working folks, who make a fully informed decision to choose the
products and services that we offer, relative to their other options in the marketplace. Regulated payday loans are just one of the
choices in the broader marketplace that help customers bridge a gap in their finances.
Every customer who walks in our door is different, and they bring a different reason for coming
into our center, and they use the product differently, all to meet their individual
needs. Some have an emergency need, while many are dealing with the periodic financial
challenges of life. Regardless of what brings them into our centers, they are overwhelmingly
satisfied with us and the services that we provide. As with any industry, the market for short-term
credit continues to evolve. In fact, banks’ efforts to participate in this market are
now limited only to the expensive overdraft programs, following recent guidelines from
the FDIC and the OCC. This is a disappointing development and one that the CFPB and other
regulators should take note of. Banks, non-banks, not-for-profits, and others should all be
encouraged, not discouraged, to participate in a regulated market that meets the needs
of consumers. Case in point, the U.S. Postal Service, by
report, is examining ways that it may be able to meet the unquestioned customer demand.
We, as a company, welcome them into the marketplace, provide they, along with anyone else who is
willing to provide customers with a product, are held to the same regulatory standards
as we are. As with the product itself, the industry’s evolution continues to include
the addition of new products, such as installment loans for those who prefer to pay over a longer
period of time, but I would caution that installment loans alone are not the answer. Customers
deserve a mix of credit products, including a 2-week product. Currently, half of the markets
in which Advance America operates already have installment loans, but still, many borrowers
in those markets choose a traditional payday loan because it best meets their individual
needs and preferences. A Harris Interactive national survey of actual
customers who borrowed from regulated storefront lenders found that 98 percent are satisfied
or very satisfied with the payday loan experience, and 93 percent carefully weighed the benefits
and risks before taking out a loan. Almost all have clear expectations, both in the cost
of the loan and the time that it takes them to repay. Further, we see very few complaints
filed against our company with state or federal regulators. Last year alone, we responded
to approximately 200 complaints out of close to 11 million transactions, and many of those
were scams perpetrated by illegal actors in no way affiliated with our company. This is
a separate and important issue that deserves special regulatory attention. As the marketplace changes to meet consumer
demand, the regulatory framework must also evolve. Up to this point, the focus has primarily
been on restrictions placed on lenders, but now we need to focus on the customer, to gain
a better understanding of why Americans borrow and value short-term loans. Despite the intense
pressure from special interest groups, regulators must avoid imposing rules that fail to consider
how borrowers behave in the real world. Test lab concepts that are designed to constrict
the ability to borrow from a regulated lender do nothing to alleviate the consumer’s need
for short-term credit. Families faced with a gap in their finances are forced into riskier
options, such as unregulated loans, which are available in every state, and which thrive
particularly where regulated borrowing options are not available, or are severely limited.
This should be a real concern to the Bureau and of policymakers in states that do not
have a regulated environment. In fact, it should be noted that in his remarks, Director
Cordray referenced a customer complaint from a customer in a state where regulated payday
lending does not exist. Today, we’re here in Tennessee, which is one of 32 states that
recognized the realities faced by borrowers, and carefully crafted laws that provide comprehensive
consumer protections while still preserving access to credit. This morning’s important discussion creates
a pathway, where the CFPB and others can work together to explore opportunities for collaboration,
with the collective goals of empowering American consumers, helping them make informed decision,
preserving their ability to access credit when they need it, and protecting them from
unscrupulous, unregulated lenders. But the hard work goes far beyond the discussion we
are having here in Nashville. Earlier this year, the CEO of Advance America called on
the CFPB to establish a working group of banks, non-banks, credit unions, startup lenders,
and other financial services providers to ensure a level regulatory playing field among
providers, and to conduct a thoughtful examination of American consumer credit. This is more
important today than ever before. It is our sincere hope that the Bureau will strongly
consider this suggestion, and we stand ready to help. Our customers and the American consumer
will be better off, as a result. Thank you very much. [Applause.] Thank you, Jamie. Oneshia? Good afternoon, and thank you to Director
Cordray and the CFPB staff for inviting me here today. The Center for Responsible Lending
is a research and policy organization dedicated to protecting home ownership and family wealth,
by working to eliminate abusive financial practices. We are an affiliate of Self-Help,
one of the nation’s largest nonprofit community development institutions. Self-Help has provided
over $6 billion in financing to low-income, rural, and minority families. CRL has worked
extensively on the predatory aspects of payday lending. We base our work on facts, and the
facts are clear. Payday loans are an inherently defective product
that violates products of fair and responsible lending for three main reasons. (1) Triple-digit
interest rates. Nationally, the typical payday loan is about $350 and carries an interest
rate of 391 percent. In Tennessee, that rate is even higher. Here, a 2-week, $100 loan
costs 460 percent. Tennesseans pay over $198 million in payday fees per day. (2) Payday
loans are designed to create a long-term cycle of debt. For payday lenders, a good customer
is a customer who cannot repay the loan without borrowing again. Rather than being a temporary
solution, we’ve found that most payday borrowers remained in debt an average of 212 days of
the year. (3) Payday lenders completely ignore a borrower’s ability to repay the loan. Instead,
they rely solely on their ability to collect, often by having direct access to the borrower’s
bank account. Payday lending imposes a high cost on borrowers
and communities. About half of payday borrowers eventually default, leaving them with no bank
account, delinquent on other bills, or in the face of bankruptcy, and when families
have no money to spend, how can they make their cities better off? Fortunately, public
policy is trending against payday lending. Twenty-two states prohibit or restrict payday
loans. Not a single state has legalized payday lending since 2005. Congress has already prohibited
payday loans for military service members and their families, and federal banking regulators
now require banks to evaluate a borrower’s ability to repay before making a loan. The
few banks that were making payday loans have now exited the business. While the CFPB cannot limit interest rates,
it can and should limit the length of time lenders can keep borrowers in debt, and require
that the lender evaluate a borrower’s ability to repay the loan. It is time to end these
debt-trap loans and promote fair and affordable products that bring financial stability, rather
than financial agony. Thank you. [Applause.] Thank you, Oneshia. Stephen? Thank you. Good morning. Thank you for the
opportunity to be here and to provide some perspective from my corner of the faith community.
Thank you, Director Cordray and staff, for the very deliberate research-based approach
to this issue. As we have seen across the country, this industry is quite creative and
sensitive to regulation. It is important that any new rules are done right, and I know that
you are headed in the right direction. The data released today, as well as the report
last year, seemed to confirm, in the big picture, what many of us have seen at the local level.
In many ways, churches and other faith communities are on the front lines of family financial
stability. One of the first stories I heard from a pastor,
when I began working on this issue in Texas, nearly 5 years ago, was about a young family
in his church. When they came to him for a second time for financial assistance, the
pastor and deacons decided to look into their situation, wondering why they continued to
need help. What they found was a hole in the family’s budget created by a payday loan.
The father had taken out a $700 loan, and $200 was being withdrawn from his checking
account every 2 weeks. This had gone on for 4-1/2 months. After paying $1,800 towards
that $700 loan, they still had not reduced what they owed. When the church stepped in
to help them out, they had to pay nearly $1,500 to pay off the loan. That’s $3,300 for a $700
loan in less than 5 months. As my organization became known for working
on these issues, we began to hear more stories, to receive calls from desperate borrowers,
and learn of other similar situations from pastors and church members. We heard from
a pastor who saw representatives of payday lenders approach adults with disabilities
at the local mental health facility and give them loans based on their monthly disability
checks. We heard from a pastor in South Dallas who watched as 10 payday and auto title lending
storefronts cropped up near his church in a matter of months, and the auto title borrower
who had her car repossessed after paying $4,000 toward a $1,500 loan. When I describe these situations to folks
unfamiliar with the practice, their first reaction is to often ask, “How can this be
legal?” I have found that concerns for this issue cross lines that so often divides people,
lines of race, religion, ideology, and partisanship. People of faith and of no faith can agree,
scenarios like these are just flat-out wrong. Unfortunately, the growing amount of research
and data shows that these scenarios are more common than unusual. Research released by
the CFPB in 2013 contained a chart which represents, I believe, the clearest snapshot of the problem.
It showed that 75 percent of all fees generated by these products come from the 48 percent
of borrowers who take out 11 or more loans a year. That is not a business model built
on one-time, short-term emergency loans, as they are marketed to the public and sold to
policymakers. These products are not loans in any traditional sense. They are, instead,
self-perpetuating, fee-generating devices where there is a perverse incentive at work.
The more the borrower fails—that is, has to pay only fees and interest to renew or
roll over the loan, or results to a new loan after paying off a loan that was unaffordable
for them in the first place—then the more money the lender makes. What has been referred
to by many as a cycle of debt is the most profitable scenario for the lender. I also want to mention the growth in the multi-payment
payday loan market. You’ve heard a little bit about it here today. Data in Texas, shows
a rapid growth in these types of loans over the past few years. Today, you can take out
a $1,000 loan with a 168-day term. You would then make 12 easy payments, every 2 weeks,
of over $245 each. That loan ends up costing $2,700. That is a 581 percent APR loan of
nearly 6 months. While a loan with fixed payments and an end date seems like an improvement,
at this cost they are not a better product for the borrower. In addition, data now shows
that many of these loans are refinanced. This shows little regard for their affordability
and can create an almost endless cycle of refinances, much like the single-payment product.
These loans are really only a way to guarantee the same amount of fees as a traditional,
single-payment loan rolled over eight times or more. What has taken place across the country is
a systematic and deliberate dismantling of traditional usury laws, to the detriment of
working Americans in our communities. While laws and loopholes may be different across
states, the products and practices are the same. Efforts to reform these laws will continue
at the state level, but many in the faith community are pleased that the CFPB has the
ability to promulgate rules nationwide, and are eager to see new regulations that help
create a more balanced marketplace, one that promotes both lender and borrower success.
Thank you. [Applause.] Thank you, Stephen. And, finally, Paige. Thank you. I’m an economist who teaches issues
related to payday loans at Vanderbilt Law School, and I’ve dedicated my academic research
to studying payday loans, title loans, and pawn shops. I wanted to highlight, very briefly,
a couple of the issues that academics like me have thought about, related to payday loans,
and what I hope will also be some future lines of research. I think some of these results
might be quite surprising to the audience here today. The largest line of research on payday loans
has been on the consequences of payday loans, and the results are very mixed. My own work
shows that payday loans cause people to file bankruptcy more often than similar consumers
who aren’t able to borrow on payday loans. I’ve also shown that offering people larger
payday loans helped them repay rather than default or roll over, suggesting that payday
loans might actually help borrowers smooth their finances through the month. Similar
researchers have found very mixed results, as well. So what I take from this line of research
is that payday loans are not all good or bad. They help some consumers and they can have
devastating consequences on other consumers, so I see policy solutions to this as very
difficult. I don’t envy the Bureau trying to come up with policies related to payday
loans. The story I take from this line of research,
beyond the fact that there’s a lot of different consequences to different types of borrowers,
is that there is a really a strong, unrelenting demand for small-dollar credit. This fact
led me to my most recent research, which has followed payday loan borrowers for months
and years before they end up borrowing on a payday loan. One issue that I see is very
absent from the conversation between academics, policy-makers, the industry, and consumer
advocates is how people end up at the payday loan shop in the first place. What I’ve shown
in this line of research is quite devastating, I would say. In the months and years leading
up to people borrowing on payday loans, these consumers have consistently very low credit
scores, in the bottom 25 percent of all Americans, and falling. Those credit scores are decreasing
leading up to the time they showed up at the payday lender. All other measures of financial
help—so the number of credit card delinquencies, maxing out your credit card, applying for
a credit card and being denied, mortgage delinquencies—are increasing at the time that people show up
at the payday lender. So I think an important question for us today, for academics going
forward is how we can help people avoid needing to borrow on these very expensive loans in
the first place. That raises another issue that I’ve been spending
my more recent academic work on, is what are the alternatives? Typically, we think of those
as pawn shops, auto title loans, installment loans. Those also have many benefits and potentially
even worse consequences than payday loans. The two issues that I hope we think about,
moving forward, is how people end up needing to borrow on these very short-term, expensive
loans in the first place, and what the best mix of products we could provide customers. I have, I guess, a sort of pessimistic story
about policy solutions. I’ve done a lot of research on what can help people make better
decisions in the payday loan world. Information disclosures don’t seem to be effective. They’re
either confusing in themselves, provide too much information, and so borrowers completely
ignore them, or they’re not addressing the underlying issues, mistakes people make in
their financial decisions in the first place. Financial literacy can be helpful, but it’s
very expensive and hard to provide at the very right time, the right moment for people
to make better decisions. Rollover bans are hard to enforce. My most
recent paper shows that extending the length of the payday loan—suppose we force lenders
to give people two pay cycles rather than the typical one—that makes no difference
in the probability people default on their loan or roll over. So, consumers have a very
short time frame with which they’re making the decisions. I look forward to the discussion today. It’s
a very difficult question. The appropriate regulation of payday loans, I see more drawbacks
to many of the proposals than benefits, so I’m curious to hear what the other panels
and what the audience has to say. Thank you. [Applause.] Thank you, Paige, and we thank all the panelists
for their thoughtful remarks, and for staying within the time limits allotted. We are actually
3 minutes ahead of schedule. Unprecedented. Paige, since you’re on a roll here, let me
start with you, and I’ll get to ask the first question. You talked a little bit about the
research that exists, both as to the consumers who use payday loans and the long-term effect
on them, of their payday loan usage. Can you add a little more flavor as to what the research
tells us on those two dimensions? Yes. I mentioned a couple of my own papers.
One shows that payday loans cause an increase in personal bankruptcy rates. We know from
studies like the one released today by the Bureau that people are heavily indebted for
a long amount of time, often paying more in interest than they borrowed in the first place.
Other studies have shown that payday loans help people avoid bouncing checks, which can
be very costly. They can help people make utility bill payments, to avoid getting their
utilities shut off, so there are at least a dozen papers looking at the consequences
of payday loans, and there is really no consensus, unfortunately, about the overall consequences.
As I said before, they seem to help some people or have no effect, and then, at the same time,
have very devastating consequences for other people. I liked the phrase the Director used about
preserving access to payday loans, because I see banning payday loans as potentially
having worse consequences on net. So it’s a difficult question. Thanks. We’ll sort of take turns asking questions.
I’ll turn now to Cheryl Parker Rose to ask the next question. Thank you, David. Oneshia, you identified
three big problems that you see with payday loans. Can you dig a little deeper and talk
about how those features adversely affect the consumer? Yes. I would say that there are many problems
with payday loans, but the central feature is that they’re made without regard to the
borrower’s ability to repay the loan. Essentially, lenders do not look at their income, other
expenses, or any other evaluation to determine whether this loan is affordable for consumers,
and data—from CRL, the CFPB, and even the industry’s own data—repeatedly shows that
the whole business model depends on the borrower’s inability to repay and the likelihood that
they will become trapped in this cycle of debt. The lender has no incentive to evaluate
the borrower’s ability, because they have first-in-line direct access to the bank account,
taking the borrower’s money as soon as it hits, often before any of their other expenses
or debt is paid. The triple-digit interest rates bolster the
effects of payday lending, and these big features together—no underwriting, not looking at
the borrower’s expenses or income, direct access to their bank account, and then the
400-percent interest rate—add up to a particularly damaging effect that leave already struggling
borrowers worse off. In fact, repaying these loans and the high fees associated, usually
leave borrowers with not enough money to pay for the basic necessities such as rent or
food. I have a question for Jamie. We’ve seen single-payment
payday loans around for over 20 years, but what are the trends in new loan product developments
and how will the market look in the next few years, and what is driving these kinds of
innovations? First of all, if I knew what the next 5 years
would look like, I probably wouldn’t be sitting here. I’d be in Vegas, betting on the future.
I think it’s a great question. One, I think that the demand will continue. There will
continue to be a need for access to short-term credit. I think you will see, in the next
5 years, technology continue to evolve the marketplace. I think you will see the consumer
continue to dictate the types of products and services that they want. I think what
we’ve seen, from our perspective as a provider, that the marketplace works best when we create
a framework that allows the customer to have a continuum of credit, where they have the
flexibility to move up and down the chain as it relates to individual products, so that
they can find the product that meets their individual need at any given time. So I think, at its core, that will be an important
feature, and I think that will not be unique to non-bank providers, like Advance America.
Hopefully that will include banks and credit unions. Hopefully that will include not-for-profit
institutions. Hopefully that will include the technological startups that you see in
the marketplace. Possibly it will include the Postal Service. But, again, I think, as
I mentioned in my remarks, all of that has to be cased under the same framework of regulations
that are equal and consistent, and I think what we see in the marketplace, one of the
big gaps is that there seems to be a lack of appreciation, in general, for how the customer
looks at credit products. We need to be looking at the customer who has a need for short-term
credit, at what their options are in that marketplace, and how they evaluate those options,
and then build the regulatory framework around the customer. As I mentioned, we talk about
restrictions on the lender, but we ought to be talking about how we design products that
meet the customer’s needs, regardless of who the provider is. I think that’s where I would see the marketplace
go in the next 5 years, and, quite frankly, probably beyond that. Thank you. Stephen, let me ask you a question. You talked
quite eloquently about some of the situations you had experienced, in Texas, in particular.
I’m asking if you can sort of generalize a little bit from that, and discuss what you
think are the primary consumer protection issues in the payday and small-dollar lending
market. Sure. Thank you. Among the many issues, I’d
say two things, really, and the first kind of echoes what Oneshia said, and that is a
total lack of assessment of a borrower’s ability to repay. People are given loans priced so
high that they are set up for failure, and, again, the more they fail to make the lump
sum payment, the more fees they pay to roll over the loan, the more money the lender makes.
So it’s no wonder that the lenders are not concerned with affordability, when they can
just cash the check, directly access the bank account, or repossess the car. If money has
been drawn from the account, as the data released today shows, then borrowers will have a hard
time making it to the next payday, and must resort to another loan. The second thing I’ll mention goes to the
lender communications with customers and their understanding of the product. Since the products
are not loans, in any traditional sense, I’ve heard again and again that borrowers had no
idea that when they were making payments, paying money every 2 weeks on their loan,
that they were not reducing what they owed. I think that’s a fundamental misunderstanding,
initially, from a lot of customers that I’ve seen. It takes a while to understand that
those very high payments, that they are trying to do their best to be responsible and pay
back, are actually not reducing what they owe. For Pam, what do you see as the biggest challenge
for consumers, going forward, in satisfying their small-dollar credit needs? Thank you, Corey. I think Director Cordray
summed it up beautiful this morning. In my view, the biggest challenge for consumers,
going forward, is finding a short-term loan, because indeed there is a need for short-term
loans, but a product that is safe, transparent, and affordable, based on sound underwriting
standards that demonstrate an ability to repay the loan or to afford the loan, rather than
the ability to collect the loan. I know we at CU are looking very closely at
the Postal Service, as my colleague mentioned earlier, post offices offering financial services,
and presumably they would be offering small-dollar loans, as well. So we’re looking for ways
to steer consumers to a safe product, and we advocate for any new innovations that are
coming to the marketplace, to be mindful of these protections for consumers, because there
is no denying, there is a need out there. Our job is to make certain that that product
is safe. Cheryl? Thank you, David. I’m going to piggyback off
of Corey’s question, and I’d like to direct a question to you, Lynn. You talked about
the need for the adoption of best practices across the industry, and I think, Jamie, you
also said the consumer perspective should drive the regulatory framework. So, for Lynn,
I’d like to ask you, what would you identify as some of the biggest challenges that the
industry faces? Thank you. You know, I’ve said to several
people this morning, one of the challenges the industry has is it’s built layers of state
regulation over the last 20 years, that, in hindsight are not always the most effective.
For example, most people don’t look at the APR on a loan. They look at the fee they pay
on a loan, but that fee is the same, whether it’s 1 week or 10 days or 14 days. It could
have been a percent a day, or it could have been structured a different way, but here
we’re kind of locked into a regulatory framework, that we’re now spending time trying to improve. So when I say, for example, that we’re making
efforts to pass installment legislation, I don’t mean the kind of installment legislation
that you don’t like—with credit life, with disability, with car clubs, with all that.
I mean regular, unsecured installment loans. Why? Because some consumers do need longer
to repay. We don’t disagree with the conclusions that consumers, in some cases, have chosen
a product that doesn’t always fit their needs. You could debate whether payday loans were
small-dollar credit or whether they were short-term loans, because, in reality, if you look at
the patchwork of state law, what you find is that what we call payday loans are small-dollar
credit, because they go up to a certain level and they’re limited there, and then the installment
loan starts above that. There’s not a good integration of product offering. I think Jamie
mentioned this. All of our concern should be in designing product and providing product
that fits the consumer’s need. So, the challenge in the industry, because
the industry is a big supporter of legislative change and of regulatory change, is to work
very closely with legislatures across the country, and to work very closely with CFPB
and other regulators to really understand what kind of products consumers need, and
how we can get there from here. I’d emphasize one more time, you mentioned best practices.
Every member of CFSA—now, this is half of the storefront lenders, and all of our companies
also offer loans on the Internet that are state-regulated—we all offer an extended
payment plan for no additional fees. All the consumer has to do is ask. From a math perspective, let me tell you what
that means. If you have a 2-week loan and you come into the store, or you call and say,
“I can’t pay,” we would automatically give you another four pay periods to pay. Well,
for those of you that want to talk about APR, which really isn’t sensible on a short-term
loan—it would be sensible if the loan was outstanding all year, but generally they’re
not—that effectively cuts the APR in thirds. So I think it is our effort to try to accommodate
what consumers need and demand, and our efforts to work legislatively and regulatory to make
this work, because when you think about payday lending, it’s a relatively new industry, but
there is much demand for short term credit, or is there much demand for small-dollar credit,
because neither small-dollar credit or short term credit is accommodated by banks. Thank
you. [Applause.] Thank you, Lynn. We’re coming towards the
close of our panel discussion, but I want to end with one question, which I’ll ask each
of the panelists to comment on, and it really follows on the question that Corey asked Pam
and Cheryl asked Lynn, from a slightly different perspective. Really, the question is, What
do you think consumers should do, or consider before taking out a payday or other small-dollar
loan? Why don’t we go in the reverse order we did last time, so Paige, we’ll start with
you this time. Well, first, I would say that all of us are
overoptimistic, so we all think we’re better drivers than the median driver. I, actually,
am a really good driver. I never had any moving violations. [Laughter.] Consumers, even if they completely understand
the loan terms and the consequences, they don’t predict that they’re going to roll over
their loan five times, four times. You can see that is a really consistent fact in the
reports that the CFPB and other researchers have put out. So, I guess I would tell consumers
to be a little bit more realistic about their own behavior. I study the psychology of decision-making
in consumer context, and this over-optimism, mis-prediction about your future ability to
repay and your future patience or self-control is really an overwhelming part of the problem
here. I would agree with that, in large part, and
say that they might want to ask themselves what happens if I can’t pay this off, or,
if I can pay it off, can I make it to the next paycheck, first of all. And then, I think
they ought to consider other options, if they have some available—family members, their
church, if possible. Some churches are looking into alternative products or benevolence funds.
I would also suggest possibly a credit union or another financial institution, because
I think there is a problem that not enough banks are offering competitive products. There
needs to be more, but there are some out there, so I would say look hard for something else
first. If I could, I would put a caution light in
front of every payday lending storefront, yellow, that says beep, beep, beep, caution,
caution, caution, because the reality is, most borrowers who take out these loans end
up deeper in debt and have further financial hardships. These loans do not solve anything,
and the idea that it’s a quick solution for emergencies is flawed. It’s usually used to
supplement income, for routine expenses, and it digs folks deeper in debt. So the reality
is, consumers should avoid using these loans at all costs. Do you agree with that, Jamie? [Laughter.] First of all, one of the things that we’ve
done extraordinarily well, as an industry, and it’s one thing we pride ourselves in,
is the simple, transparent, and full disclosure that we offer to our customers. If you compare
the products and services in our centers to just about any other financial instrument
that a customer avails themselves of, you will find that we are the most straightforward
and easy for them to understand. So I think that is an important part of helping the customer
evaluate the costs, the fees, the terms of any of the credit products, or any of the
other products that they are considering when they have a short term financial difficulty,
whether it’s a payday loan, whether it’s overdraft protection, or whether it’s the late fee associated
with paying their water bill late, if they don’t have the money necessary to do it. I
think those are all things that help the customer evaluate the benefits and risks associated
with any credit product, and as Senator Warren used to say, “help the customer avoid the
tricks and traps that can lie on the road to getting the credit product they need.”
That’s where we try to stand, as an industry, as an association, and as a company, and we
think that the rest of the financial services industry should come along with us. [Applause.] I think I would add to that that we support
financial literacy. Our industry in Tennessee contributes to a foundation that provides
financial literacy, and the best consumer is an informed and knowledgeable consumer.
Then, I would say that consumer should take responsibility for their decisions. [Applause.] I think, just like we saw problems in the
mortgage industry, where all of us on this panel could go and get an adjustable rate
loan at a very low rate, and when interest rates went up, some of us might not have been
able to afford that house. That’s our responsibility. Every consumer needs to take responsibility
for themselves. [Applause.] So I think if they have the basic building
block of financial education, in schools, as we do here in Tennessee, and they have
the ability to budget, they have the ability to understand what they need, they’re not
too optimistic so they know when they can pay it back, that’s the key and that’s what
I would tell consumers as they consider any credit product that they might be looking
at. [Applause.] One of the advantages of being last is that
you can easily say I associate myself with all the comments from my colleagues, because
there is no inconsistency. I think all of the things that were mentioned are extremely
important. Certainly, in my book, you’ve just got to understand the cost of what you’re
taking out for this payday loan, or any loan, for that matter. So ask the questions. Get
the information. Make sure you’re getting information that you can understand and that’s
meaningful. And then, a word of caution. I would say,
also, beware of Internet payday lending, because of added security and privacy risks. As borrowers,
we supply bank account numbers, Social Security numbers, and other sensitive financial and
personal information electronically, via loan applications. Well, that makes it easier to
transmit the information, but it also makes it easier to steal. So, thank you. [Applause.] That concludes the panel portion of this morning’s
program. Let me ask you to join me in thanking all of our panelists one more time for a thoughtful
and thought-provoking conversation. [Applause.] And I’ll invite the panelists, if they can
take their seats back in the audience, and I’ll turn it over to Zixta Martinez, our Associate
Director for External Affairs, who will moderate the next portion of the program. Thank you, David, and thank you all who joined
us today at CFPB’s Field Hearing in Nashville. We’re spending a couple of days in Nashville
to do what we’ve been doing throughout the country, which is to hear from consumers directly,
directly from industry representatives, from community advocates, and many others. A number
of you have signed up to share comments and observations about today’s discussion on payday
lending, and to tell the CFPB about what’s happening in your community. This is an opportunity
to make sure we understand the consumer finance trends and practices in your neighbors, in
your communities. Each person who signed up to provide testimony
will have 2 minutes to provide that testimony, and what we hear from you is invaluable, and
we want to hear from everyone who signed up, so I encourage you to please observe the 2-minute
limit so that we hear from every single person who signed up to provide testimony and to
tell us what’s happening in their community. Why don’t we get started. One of our staff
members, either Laura or Carlos, will bring a mic to you. Please tell us who you are.
Our first audience participant is Molly Fleming. I’m Molly Fleming-Pierre with Communities
Creating Opportunity in Kansas City and Missouri Faith Voices. We represent 300 congregations
across Missouri, a state that experiences a $317 million debt drain every single year
as a result of payday fees. I came because I promised the people I work with I would
bring their stories in this room. I’ll talk about as many people as I can before I hit
my 2 minutes. I came because Elliott Clark is a disabled
Vietnam veteran and he is a good man, and if he was a current active duty member who
wasn’t disabled, he would actually be covered by the Military Lending Act, but he’s not.
He is a man who has five beautiful daughters and a wife who broke her ankle, and when she
broke her ankle and she could no longer work, he took out a payday loan to cover the mortgage.
When that payday loan spiraled, he took out another payday loan to try to cover the mortgage
and keep the family home, and keep his daughter in college. When he was at the payday lending
shop, they suggested he take out three more payday loans, just to make sure he could cover
all of his bills. Elliott Clark took out five payday loans,
that he spiraled in for 5 years. He paid $30,000 in debt, and he lost his home. That is what
we’re dealing with every single day in Missouri, and I am grateful for you being here, from
the Consumer Financial Protection Bureau, to hear these stories, because there are millions
more just like them in Missouri. I’m here because of Sandra, a disabled woman,
who has a third-grade education and was targeted outside of the place of work, where they knew
that she was a disabled individual, who could barely read. They trapped her in a consumer
installment loan. She paid $15,000. It took an advocate to get her out of it. So I bring
those folks into this room and I thank you for hearing their testimony. [Applause.] Thank you, Ms. Fleming. Beverly James? Michael
Allen? Good morning. My name is Michael Allen. I’m
with Catholic Charities of West Tennessee, and I’m here today to speak to you as a representative
of Memphis and West Tennessee. Our work at Catholic Charities focuses on veterans, at-risk
children, and seniors, homeless men and women, and immigrants. Increasingly, the number of
clients that we work with report finding themselves caught up in this almost inescapable web of
payday loan-type products, and while there are multiple stories I, too, could tell, I’ll
share just one. This gentleman’s name is Roy. He, too, happens
to be a Vietnam veteran-era Navy man. He’s 62 years old, and he came into our program
for homeless veterans and their families last year, having recently had his truck repossessed,
due to his falling behind in payments to a title loan company. The title loan was one
of two such predatory financial products he had outstanding. The other was to a check
advance company, and he was behind on both. As a self-employed painter, by trade, the
loss of Roy’s truck further exacerbated his predicament, as the truck was critical to
transporting his painting materials to various work sites. Ultimately, he found himself without
income and homeless, couchsurfing with friends. Roy is not alone. A simple Google search just
yesterday, of the term “payday loans Memphis” generated over 225 different physical locations
of payday loan, check cashing, title loan type storefronts in our community. That’s
more than triple the combined number of Walgreens, CVS, Target, Walmart, and Kroger stores in
the same community. Through our national organization, Catholic Charities USA, we are partnering
with and appreciate the support of the CFPB and others in growing our asset development
efforts, and in the absence of stronger legislative or regulatory efforts, we are working to provide
broader financial literacy to our clients in such areas as basic budgeting, the role
of credit, and common financial pitfalls to avoid, and clearly, predatory loan products
fall into this last category. I thank you for your time today. [Applause.] Thank you, Mr. Allen. Alicia [ph] Brown? Good afternoon. My name is Alicia Brown. I
work with a payday loan company. I’ve been in business for 12 years, and for every story
that you pull through here today, with the horror story of how horrible we are, there
are dozens more success stories. Yes, this is a viable product. Yes, we do need it. Is
it for everyone? It’s just like Lynn and Jamie said. It is not a one-size-fits-all. We are
an evolving industry. We are looking for more ways to be able to get money to our customers.
A payday loan is a short term loan. It is designed to help you with whatever life problem
you have going on at that time. No, it is not meant to be continued for 12 months. An
APR for a short term, 2-week loan, 30-day loan or whatever, to discuss an annual APR
with it, it makes no sense. That is why we would have the installment loans, that Lynn
spoke about, to be able to fit those customers that can see that they are not able to pay
a loan off in 30 days. But they must accept responsibility. The people that get their
stuff repossessed, or what has happened that had to have them go to their charges, there
are customers that will come to us with no intention to pay back. We can’t increase our
rate. We have the same operating expenses as any other business in the community, but
we can’t raise our rent. We can’t charge an extra fee for this or that. We have to pay
our bills and still be able to operate within that fee that we charge those customers. Many
customers do not ever walk back in our door once we hand them money. They are gone. It’s
a high, high risk that we take. If we didn’t, the would be able to go to a bank and a 6-percent
annual rate, but they can’t. We are gambling on them, and we have to collect our money
back. No, we’re not going to go break legs or threaten a first-born or anything like
that, but we expect them to come back in. So, that means that we have to make wise loans
to these customers. We do look at income and how much do you make, and such like that.
We would lose all of our customers. We would give them money. We would never get it back.
We would never see them again, if we were as horrible as the way we are portrayed. It’s
just not factual. There are unscrupulous lenders. There are
unscrupulous people in all industries. It’s not just ours. But people love to parade the
most horrible-est of stories to you, and let you think that’s the way our industry is,
and it’s not. Your examiners have been in our locations. You’ve heard our customers.
We help them. We provide something for them that they could not go to another place and
get, and I believe that we need to be able to provide to them. If it’s not on a 14-day
basis, if that’s not the product for them, let us offer them something. Those 22 states
that do not offer payday lending, do you really, really, honestly think that they are not getting
that money from some other place. You’re wearing rose-colored glasses. [Applause.] Thank you, Ms. Brown. Steven Taterka? Good afternoon. My name is Steven Taterka.
I’m an attorney in private practice here in Tennessee. I’ve been doing this for about
20 years, representing primarily low-income consumers. Before that, I was an assistant
attorney general in the Tennessee Consumer Protection Division in the AG’s Office. Before
that, I was in the Indiana Attorney General’s Office, doing similar work, and before that
I was a legal services attorney. I started in legal services right out of law
school, in 1977, and at that time, in this country, we still had a framework for usury
limits, and I’ve seen, over the last 34 years, that’s completely disintegrated. Some of it
started with a supreme court decision in the late ’70s, having to do with credit card interest
rates, but even then, never did I imagine that banks would be charging interest rates
in the 400-something percent interest rate realm that we’re in today. To me, the payday loan industry, the automobile
title pawn industry, these are examples of the complete erosion of usury protection that
we’ve had for years, up until, say, the last 20 years, and I think, as a society, we have
to ask ourselves a moral question, which is, how high is too high? The industry claims
that the annual percentage rate is irrelevant because these are short-term loans, but as
many of the panelists have acknowledged this morning, these loans get turned over, over
and over again. No restaurant stays in business by selling a grand total of one meal to one
person per year. These businesses don’t stay in business doing one 2-week loan to one customer
per year. I think Oneshia from the Center for Responsible
Lending mentioned earlier some of the limitations that Congress has placed on loans to service
members, and the Military Lending Act limits interest rates to our service members to 36
percent annual percentage rate, and I applaud Congress for doing that. For all the dysfunction
that Congress has shown over the last few years, at least they got their act together
on that. On both sides of the aisle, they decided that 36 percent was the maximum we
were going to allow our service members to be charged. I agree with that but my question is, what
about everybody else? Why isn’t everybody else entitled to those same protections? Is
everybody else a second-class citizen and they should be charged 460 percent—which,
incidentally, is what it comes out to, on the Tennessee statute. The industry says they
want to be regulated. They’re willing to be licensed. They’re willing to agree to best
practices rules, and things like that. But the one thing the industry will never agree
to is a regulation on the interest rate, and, to me, it’s a little dishonest to say we’re
willing to be regulated, but yet we’re not willing to be regulated on the most important
aspect of this. One of the frustrations I have is when I look
at the Title Pawn Statute, when I look at the Tennessee Payday Loan Statute, and I see
the terminology that they use—and these statutes were clearly industry-sponsored bills—they
use language that says that these fees shall not be considered interest for any purpose
of law. Well, of course it’s interest. You borrow money, you pay extra to use it for
some length of time, and you pay that back. Of course it’s interest. Thank you, Mr. Taterka. [Applause.] Blake Sims? Good afternoon. My name is Blake Sims. I’m
a partner with the law firm Hudson Cook in its Chattanooga, Tennessee office. We focus
our practice exclusively on advising consumer finance companies on compliance matters. We
work every day with responsible providers of consumer credit. These companies spend
considerable time and resources to provide financial products that consumers want and
need. They provide these products while complying with federal, state, and even local laws and
regulations. These companies are continually innovating to offer more options to address
consumer need. Allowing companies freedom to innovate and
serve all consumers, not just consumers the government believes need credit, under the
umbrella of a regulatory environment focused on clear, accurate, and conspicuous disclosure
should be the goal of the CFPB. Eliminating credit options is never the solution. Neither
is forcing lenders to offer products that are simply not economically viable. The FDIC
Small Dollar Pilot Program attempted this, and the program failed. In the absence of options, consumers are forced
to turn to inferior alternatives, or have no alternatives at all. Options allow consumers
to control their own financial situations. The Tennessee model, which allows various
options, and which the legislature is working now to increase those options, has worked,
and consumer complaints are extremely low. We suggest the CFPB consider the Tennessee
model when developing federal policy. We also suggest the CFPB consider, as did Don Morgan
from the New York Federal Reserve, where these consumers would be without a short-term credit
option. Thank you. [Applause.] Thank you, Mr. Sims. James Kirby? Belita Howard?
Bob Ries? I know some of the people on the panel. I
know Brenda and I know Governor Cooper. I know they all have good intentions, but, folks,
the road to hell is paved by good intentions, and I, as a disabled Army veteran, am offended
at you people, anybody, for whatever reason, using the military and the veterans to justify
your positions. The disabled veteran is the responsibility of our Federal Government,
and specifically their Commander-in-Chief, to take care of them, and it’s a shame that
they don’t do it. [Applause.] Every one of us that ever served in the military
took an oath to defend our Constitution against all enemies, foreign and domestic. We are
willing to defend it with our legs, with our lives, and that’s what I’m here to speak about.
You come out with federal regulations, and you foist it upon the American people as though
it’s law, and you enforce it as though it’s law. Our Constitution, in Article I, Section
7, says the only way to pass a federal law is for both houses of Congress to pass it.
Those of us who took that oath to defend the Constitution, and who believe in it, have
a moral obligation to ignore your federal regulations. They are not the law of the land.
I don’t care whether it’s good intentions or bad intentions. We need to stop that. We
need to have our government start following our Constitution. Thank you. Out of the interest of fairness, which I heard
up there a lot, Jim Cooper got name recognition. I’m Bob Ries and I’m running for Congress
in the Fifth Congressional District. [Applause.] Those of you who believe our government should
follow the Constitution, and not spend more money than they take in, it’s
Check me out. Ries is spelled R-i-e-s. [Applause.] Thank you, Mr. Ries. Sonya Jones? Hello. My name is Sonja Jones and I’ve been
working with the payday loan industry for about 8 years. Some of my customers wanted
to be here today, but their jobs would not let them, and I just wanted to share some
of the things that they wanted me to share with you guys. We help our customers. We have customers that
come in, and they cry. They have no way to get help for what they need help for. I’ve
had customers bring me stuffed animals, roses after I have helped them through their situation,
whether it is emergency or whether it is just life obstacles. So, please don’t let that
interfere with what we are doing to help the customers. We explain everything to the customer.
We don’t let one customer walk out that doesn’t know exactly what they’re getting into, exactly
what they’re looking for. I mean, we’re not here to try to do anything that like to the
customers. We just are trying to help the customers where no one else will help the
customers, and they enjoy that, and I enjoy my job because it makes me happy when I’m
able to help someone else. I’m emotion and they get emotional, and it’s a thing that
we’re helping someone that no one else would. So that is what we do, and we explain what
we’re doing. [Applause.] Thank you, Ms. Jones. Dwayne Carson? Thank you very much for the open forum. My
name is Dwayne Carson. I’m with Center for American Racial Equality. I respectfully have
to disagree with you, Director. I think payday loans are a needed option. Payday loans provide
choice, and payday loans are an integral part to the safety net in a minority community,
and if you further regulate the payday loan industry, you’re sending a message to the
minority community that they are not smart enough to make their own financial decisions,
for themselves and for their families. Let’s leave it up to them. Let’s leave it
up to the individuals, because contrary to what people believe in D.C., people in a minority
community are smarter than what the government gives them credit for. Thank you very much. [Applause.] Thank you, Mr. Carson. Charles Kirby? Good afternoon. Thank you to the CFPB and
also to the loan industry that participated in the panel. I think it’s valuable. I’m a
city councilman in Decatur, Alabama. Last year, we passed a moratorium barring new payday
loan companies coming in. We have since extended it, and we’re currently working on zoning
restrictions to negate the negative aspects it creates in our community. I’ll pass the other things I was going to
say. I hope to impact you to continue to work with the federal and the state governments
to reform and regulate the industry. To urge you to do that, I will give you one thing
to look at, before I close, to show you the effect it has in your communities. For those
of you who are appointed, for those of you who are elected, those of you who have not
talked, those that are, and have them go to your local city, and ask, “How many of your
municipal employees are suffering the negative impact of the payday loan industry through
garnishments, court judgments, or otherwise?” The number will surprise you. It should shock
you, but it should guarantee you that we have need of reform and regulation. Thank you. [Applause.] Thank you, Mr. Kirby. Jesse Johnson? Thank you, panel. I’ve listened to a lot of
the discussion and presentations from the CFPB over the last couple of years, at different
forums, and it’s been nice that they’ve been participating in industry groups, and they
seem very open to talking with us that participate in the industry, and I appreciate that. But,
when I listen to some of the discussions, it seems somewhat apparent to me that we tend
to forget one important thing about the American consumer. The American consumer is an expert
at finding the best deal. We will stand outside, in a blizzard, for 8 hours, on Black Friday,
to save $20 on a crockpot. I mean, that’s kind of funny, but the point it the amount
of effort that the American consumer will put in to try to save themselves some money
is evidence to me that they are a smart shopper. There’s been tremendous competition in the
small loan industry. It has expanded, but like any other business, that expansion has
created fierce competition for those new customers. It may be the term of the product, it may
be the pricing of the product, it may be the structure, that these companies are competing
with one another upon, but as competition increases, the consumers continue to have
more options, and these people are major league shoppers. So, I would urge the panel to consider
what alternatives may or may not exist for these major league shoppers, in the marketplace. [Applause.] Thank you, Mr. Johnson. Beth Campbell? Hi. I’m just here as a consumer and am interested
in this discussion. Thank you for being at Nashville, Tennessee. One comment I’ve heard
today, and I’ve read other places, is that the U.S. post office is thinking about getting
into this business. My comment would be that the post office is not on sound financial
footing— [Laughter.] —and I can’t imagine why they would want
to embark on something this complex. I would really suggest that they don’t go that direction. [Laughter and applause.] Thank you, Ms. Campbell. Andrew Langer? Hello. My name is Andrew Langer. I am President
of the Institute for Liberty. We are a D.C.-based advocacy organization that focuses on the
impact of regulation on business, and it’s a pleasure to be here today. I have to say,
though, I was a little distressed by Chairman Cordray’s comments and some of the comments
by people on the panel, not by so much what he said, or what you said, sir, but by what
you left out. One of the things that I am discouraged by is this perpetuation of this
myth of the 300- or 400-percent APR, and that this is somehow unique to the payday lending
industry. If you look at a family that takes out a $100,000
mortgage on their home over the course of 30 years, they’re going to pay another, almost,
$200,000 on that loan, yet nobody considers that usury. But what’s even more disturbing
to me is the fact that we’re not talking about regulation of this industry. We’re talking
about destroying an entire industry in the financial services sector, and replacing it
with some weird combination of the post office and community activist-based lending institutions. Now, right now, who is on the hook when someone
defaults on a loan? The businesses themselves. Who would be on the hook once the American
government takes over this industry? The American taxpayers. That’s exactly right, to the tune
of tens of billions of dollars, potentially, every year. [Applause.] We cannot and should not let this happen.
If you want to regulate, go ahead and fix the problem by changing rules, but don’t destroy
an entire sector and apply what is essentially a 19th century institution to a 21st century
problem. Thank you very much. [Applause.] Thank you, Mr. Langer. Altie Jordan? Good afternoon, everybody. My name is Altie
Jordan. I am the Executive Director for 18th Avenue Family Enrichment Center. We are a
child-care education center, and I’m here to kind of talk to you about how these particular
facilities help the community. We are in partnership with a facility of this nature, and over the
course of the last 5 years that I’ve been there, they’ve done nothing but help the community
through giving back, as far as collecting food for families who need food, giving to
our toy store donation, which is giving toys and things for children at Christmas, coming
in and doing projects of beautifying our center, beautifying our grounds for our children and
our families. So even though you’re talking about the negative
things that these facilities are offering, I want you to know that they are doing great
things within the community, and they are needed within our community, for things of
that nature. So I just want to say thank you for all of those things that they’re doing,
not only for us but for other facilities within and around our communities. Thank you. [Applause.] Thank you, Ms. Jordan. Thomas Stevenson? I’m Thomas Stevenson and I’m here today as
a consumer, and I want to comment directly on what the CFPB is doing. The CFPB is an
excellent and a perfect example of the Federal Government overreaching and over-regulating
what is supposed to be free markets. [Applause.] Kind of the paradox of y’all coming here today,
I’m very glad that y’all are here in Tennessee, because in Tennessee we pay our bills. We
operate on a balanced budget, and my household operates on a balanced budget. Washington
doesn’t seem to understand that, and I’m sure that they could use some of your financial
classes on how to avoid bad credit, which is kind of the paradox of this situation. [Laughter and applause.] But I am more concerned with this overreaching
and overregulation because this is a bureau that was derived from the Dodd-Frank Act,
if I’m not mistaken, which was created to regulate the mortgage lending industry, which
is not what we’re here doing today. So, it’s another example of government bureaucracy
continuing to grow. I’m very upset that our taxpayer dollars are going to groups like
this, to over-regulate a land that’s supposed to be free markets, and I’d be very interested
to know how much of our tax dollars were spent on this event today. [Applause.] Thank you, Mr. Stevenson. Don Gowen? Thank you. My name is Don Gowen. I’m from
Decatur, Alabama. I agree with the lady up there, Ms. Herring. She made all the remarks,
so I’m not going to make any or derogatory or positive. What I’d like to say to you is
this. I’ve been in the traditional consumer lending business for 50 years, before some
of you in here were born. I was here when the Truth In Lending Act first came out, and
standing up here, as a lender, you’re going to say, “Well, he’s crazy as a Bessie bug,”
but I believe that payday loan lending is one of the worst lending activities that we
have ever had in the United States. I have worked with a number of groups, and, by the
way, I’m not on anybody’s payroll today. I’m not from any consumer advocacy group. I’m
here for myself and what I believe about the industry and what’s good for the American
citizen. What I would like to talk about is something
that is a little bit different. We’ve talked about compromise and talking to people, and
we tried to do that in the state of Alabama down there. We had a law down there that was
called Alabama Small Loan Act. We’ve got one called the Alabama Consumer Credit Act. They
worked well, since 1955, in the state. Then we had deferred lenders, or payday lenders
came into Alabama and circumvented the law down there. We’ve tried to get reform on it.
We’ve tried to work with the state legislature. We’ve had bills for the last 5 years sent
down there, and we can’t get a bill out of committee because of the lobbyists that come
in from the payday loan industry. I went and testified this year, in the regular
session of the legislature, and while I was standing up at the podium down there, I counted
32 lobbyists that were standing around the edges out there. I talked to one lobbyist
that was representing the industry down there, and I asked him, “How much did you make today?”
He said, “$25,000.” That’s a lot of money that the consumer doesn’t have. The CFPB is the first time in my life that
I’ve ever seen a federal enforcement agency that did what it was supposed to do, and I
applaud CFPB for what you’re doing today, and I believe that we need to have a national
regulation of the payday loan industry, because you can’t get it done through state legislature.
You can’t get it done through straight business. [Applause.] Thank you, Mr. Gowen. Jessica Parker? Hello. My name is Jessica Parker. I’ve been
in the payday advance industry for about 3 years now, and I get to help hundreds of people,
and I enjoy doing it every day. I’m here today for a customer who is not able to make it
because she had to go into work today, but she wanted me to share her story. She is a
single mother, has two kids, and because of some unforeseen circumstances, got into a
situation where she couldn’t pay her rent. She fell short on her rent. She came to use
because everyone else told her no, and we were able to give her the money that she needed
to provide shelter for her family. She was very thankful, when I was able to tell her
yes. She was in tears, just full of joy that she was finally able to get the money that
she needed to keep shelter over her family. There are many a story that you could say,
and a lot of people say they could get help from their families, from the bank, but, no,
they can’t. What do you do when your family has no money and they’re in the same situation
that you’re in? You need help, and we’re here to help them, and I enjoy doing it every day.
Thank you. [Applause.] Thank you, Ms. Parker. Stacy Ries Snyder? Again, thank you all for being here, but I
do have to say, I am troubled by the Federal Government’s overreach, again, on trying to
regulate human behavior. I’m concerned about a couple of things, because these people,
they sign over the ability for those people to get into their bank account. We are intelligent
consumers. Just like this gentleman said, we’ll go a long way to find a good deal, and
overreaching and trying to regulate how we behave because we get into trouble, or our
families don’t have the money to help us out, or we don’t have a relationship with a church—it’s
not the government’s business to regulate consumer behavior. That’s all I have to say. [Applause.] Thank you, Ms. Ries Snyder. Teresa Burns?
Billy Bratcher? Gary McNabb? First of all, thank you in the CFPB for being
here today, and also for this opportunity to speak. I am CEO of a small payday loan
lender in rural Tennessee. Our stores primarily are in towns of 10,000 and under people, a
lot of them in 2,000 population towns. On the way here this morning, I called four different
banks and I said, “What’s the minimum loan you’ll make?” I heard $1,000, $1,500, $2,000
and $5,000, and I said, “Why won’t you do smaller loans?” They said, “We cannot make
any money.” “We can’t make any money on a $5,000 loan,” is what one bank told me. I say that to you because I really think you
need to understand that consumers need access to credit. Is the payday loan industry perfect?
No way. No. Nobody’s perfect. One thing that’s been said several times today is, properly
income qualifying people. We try our best to do that, and I’m the first one to tell
you we mess up, but, as a result of that, we’re able to loan money to new customers—and
I define a new customer as somebody who hasn’t done business with us in 6 months—that,
in a year’s time, 90 percent of those will pay off and we’ll never see them again. That’s
what we’re all about, and I would invite and welcome the opportunity to have a more detailed
discussion with the CFPB about my numbers, because I think they’re different in rural
America than what a lot of the numbers are. Thank you. [Applause.] Thank you, Mr. McNabb. Joe White? Hi. My name is Joe White, and I’m here today,
I run a technology company in Nashville. We have over 200 employees throughout the state.
I also sit on the board of the Bootstraps Foundation. Bootstraps Foundation takes children
who have a 4.0 in high school but have absolutely no means to go to college, and they have lived
through adversity. Awful things have happened to them—cancer, incest, murder—yet they
have a 4.0 and they want to go to college, and Bootstraps get them there. Lastly, I’m on Junior Achievement. We actually
teach financial literacy to fifth graders and high-schoolers. So all of these things
tie in together. We have employees, and we have these kids going to college to get learning,
and then financial literacy with Junior Achievement. I, too, am perplexed with the government overreach.
I think it’s awful. But, at the same time, I think about things like motorcycle helmets,
and seat belts, and speed limits, and I’m thinking, bully, those are good government
ideas. I’m glad to be overreached in those areas. So, I think there’s a good spot for payday
lending, and it might need some regulation, but there is a spot there that needs to be
fulfilled. I want to make a comment that the payday lending company in Nashville, Advanced
Financial, they actually send one of our recipients each year to college, with money they raise
in the community to give back, and their CFO has recently approached us and said, “Can
we help you at Junior Achievement, with financial literacy?” Just like Dave Ramsay says, “Perhaps
never needing a loan is the best outcome.” We’ve got some good people in this industry
in the city, and they’re not all bad. And, lastly, Paige, with Vanderbilt, financial
literacy education, thank you for doing that and getting on this committee to make sure
what you know, they know. Oneshia, the consequences. You talked about them and they are dire, but
sometimes the consequence of not getting that loan might even be more dire. [Applause.] And lastly, Lynn talked about personal responsibility,
and I couldn’t help but think of the two examples in Director Cordray’s speech. He gave two
examples, the 81-year-old woman who borrowed some money to buy the cancer medicine for
her daughter. That’s an awful story. That’s just awful, and hopefully Obamacare and all
the craziness going on there will help that a little bit. [Laughter.] But any time of loan you have, if the wager-earner
is deceased, you’re going to have trouble paying back that loan, and that’s what happened.
I don’t think you can regulate around that. And, lastly, Lisa. She lost her job, and she
went for a payday loan. Listen to that word—it’s a payday loan. She lost her job and then went
to get a payday loan. Lisa, you don’t have anymore paydays. [Laughter and applause.] Thank you, Mr. White. Tonya Burroughs? Heath
Cloud? Hello. My name is Heath Cloud. I’ve been in
the payday lending business now for about 13 years, and it’s been a very enjoyable time
of my life because, in payday lending, you see so many different stories that come through,
and you’re able to help those folks in that time of need. We also teach our people and
our customers what they need to borrow, not to enforce more upon them than they can stand.
But I enjoy doing what I do for a living. I love being able to help people in that time
of need, because you’ve heard it across the board here . You cannot go to a bank, just
for $200 or $300 or $400. I am so thankful to be able to help someone in a time of need,
a crisis or a small situation, and then see that smile, that relief upon their face, when
they leave my office, because I was able to help them. That’s what makes my day, and that
is why I enjoy doing what I do for a living. I’ve been doing it 13 years and I’m planning
on continuing to do it as long as the industry is in place and intact. Thank you. [Applause.] Thank you, Mr. Cloud. Tristina Sparks Gonzalez? Hello. My name is Tristina Sparks Gonzalez.
I am a representative for Advance America. I’ve had the pleasure of working for this
company for 10 years. I reside in Clarksville, Tennessee, where Fort Campbell is. There are
some things that I am very concerned about. Number one, nobody has touched on the statistics
when it comes to the 36 percent annual percent rate that is being posed in the military world,
that is now trying to be imposed in the civilian world. What this equates to, in our industry,
is $1.18 on every $100 borrowed, which is not enough to cover overhead costs such as
rent, water, lights, salary. Everybody speaking today has not touched on
that. I’m all for regulation. I’m all for imposing regulation to help consumers have
fair and transparent regulations, so that they know what they’re getting into, and to
make it a little bit more affordable to get out of. But what I am not for is unfair, untransparent
regulation that will be crippling to this industry. You should consider the fact that
this is a multi-billion dollar industry, and if you cripple this industry, you’re going
to put possibly millions of people out of jobs, their affiliates, and the consumer won’t
have as many choices as they do now. I just want you to think about these things before
you take this information to wherever it’s going, and to all the state legislators that
may be here, I want you to think about that, too. Thank you. [Applause.] Thank you, Ms. Sparks Gonzalez. Mitch Smith? Hi. I’m Mitchell Smith. I’m also with Advance
America and been a payday lender for about 10 years. The one thing that amazes me that no one has
talked about at all is the fact that you can bounce a $5 check, and wham, there you go,
$35 on your bank account. Who is the villain really? [Laughter.] I mean, I can get you $200 for $35, and you’ll
be set to go for the next 2 weeks. We may not be the best choice, but we are the only
choice for so many people, so think about that. Thank you, Mr. Smith. Paul Turner. Thank you. I’m Paul Turner. I’m a professor
of psychology, and my interest in payday loans really comes from my community and a faith-based
orientation, and I appreciate the faith-based community being included in this conversation
today. In Columbia, Tennessee, we have a proliferation
of payday loan businesses, and we’re seeing the effect of that in our community. We are
seeing some of the effects that has on families and being caught up in a debt cycle. So one
of the things we’re doing at the Maury Hills Church is that we are providing a pilot program
where we’re going to be able to do some counseling and maybe debt reduction things for some families
in our communities, and so this is the piece of it that we think we can work on within
our church and as a part of the faith-based community. However, we also believe that greater protection
is needed for consumers and appreciate the opportunity to be here today and to advocate
for that. Thank you. Thank you, Mr. Turner. Kimberly Waters. My name is Kim, and I’ve worked for a payday
advance company for almost 7 years now. Today, I’ve heard a bunch of we trap people,
we don’t look at the ability that they have to pay it back, and that’s not true. Ability,
stability is one of the main things that we look at, at my company, to make sure we’re
giving good loans. We’re giving these people money that they can afford to pay back. We don’t trap them into taking these loans.
They are not stuck in them. It’s their choice. Where else are they going to go? They can’t
go to a bank and borrow it. Myself, I’ve used them before I worked for
the company, and I’ve used them while I worked for the company. They come in a good place
when, you know, Christmas, Easter baskets, your kids outgrow shoes. Those are the things
that you can’t afford all the time. It’s nice to be able to have somewhere to go, no judgment,
not looking at my credit, gives me $100, $200, and it’s a lot cheaper than running my debit
card through the bank and, you know, them charging me $36 and then $5 a day for being
overdrafted. I absolutely love what I do, and I love being
able to give back to my community. Thank you, Ms. Waters. [Applause.] Blaine Dixon. Blaine Dixon. [No response.] Jordan Maynor. Jordan Maynor. That’s me. Good afternoon. I’m Jordan Maynor,
and I’m a proud Tennessean. The panel is here today because they are concerned
about the cost associated with payday loans. Well, I’m here today because I’m concerned
about the costs associated with CFPB. I was actually reading an article the other day
about how much the CFPB employees make, and it’s more than the average government employee.
And some of the employees with this Bureau were actually on the Obama campaign team in
2012. I don’t know how you guys feel about that, but I know I can speak for a lot of
Tennesseans and say that that doesn’t sit well with me. In addition in addition, your spending is
not subject to congressional oversight, and if Congress is not overseeing where your spending
is going and where your money is going, how can we tell where there is waste? How can
we tell where that money is going to? And so there’s a lot of concerns with the cost
with CFPB, and that’s why I was here today. Thank you. Thank you, Mr. Maynor. [Applause.] Eric Quiram. Eric Quiram. Hi. My name is Eric, and I go to church right
down the street here in East Nashville, City Church of East Nashville. So I represent a
small group of people here, the faith community that doesn’t see all those villains and hears
you loud and clear there is a need for the lending. My question is I also attended Vanderbilt
Divinity School, and why are there not more non-profits doing this type of lending? Why
are they not involved in this industry? And I guess to add to that, if this kind of lending
is so damaging to people, maybe there will be more non-profit lending organizations cropping
up to meet this need to the people that need money to borrow, without the if you’re a non-profit,
you’re not going to have those kinds of profit-making needs, and so therefore, you’re going to be
able to meet this need without having those perverse incentives of the industry. Thank
you. Thank you. Alicia Patz [ph]. Alicia Patz. One thing I actually didn’t hear either in
this room, and maybe I’m just not listening very clearly, is the fact that we have an
economy that’s dropping. There’s a lot of people without jobs, a lot of people in need,
where say, for instance, who gets paid monthly, and maybe they don’t get paid every 30 days.
Maybe they get paid every fourth Wednesday. Sometimes these events do occur, and people
need some kind of avenue, somewhere to do. Say for instance, they have something they
have to pay for, and they don’t have good credit. They can’t go to the bank. My mom
just lost her job, and I can’t go to her to get the money. My church has too many people.
They can’t help me. These places are here and a place to help, and yes, they disclose
everything, and you have options. You don’t have to take it, but it is a good avenue to
have, and there’s lots of positive things, like there’s fund-raisers, there’s jobs, there’s
lots of donations. There is more positives I see in this than I have in the government
coming to regulating things. So I want to say I want to applaud the people who are here
for the times in need where we don’t have banking institutions, where they don’t disclose
information, where you may go forward, and you may say, “Hey, I want to put a stop payment
on something,” and the banker says, “Oh, by the way, you just signed off to pay $36, and
now your account is in overdraft. You have to pay another $36.” It’s not disclosed. They
may tell you to read the fine print, but they don’t disclose it. So I applaud the companies that are here for
consumers to be able to go through without having good credit or not having a family
member or maybe not even get paid every $30. I applause to have this avenue here for people
who need it. [Applause.] Thank you, Ms. Patz. Charles Hunter. Thank you. I must work for one of the good
guys in this industry. We’ve been in this business for 35 years. I’ve been a part of
it for 15. My job is the job of answering all the consumer complaints and concerns that
come in. It’s a very forgiving job, because if somebody comes in or calls in or writes
in or sends a CFPB complaint or state complaint that says this is a hardship, then the path
is real clear. We verify the claim, verify what the customer owes, ask the customer a
simple question. I’m the guy that talks to the customer and says, “Okay. What would you
like us to do?” and I would say 98 or 99 percent of the people say, “Okay. I owe the money.
I’d like to pay it back, but something has happened in my life, and I cannot do it as
I agreed to.” And we always say, “Yes. You just tell us what you want to do. If you have
a hardship, if you have a problem in your life now, if you want to stretch it out in
four payments or eight payments, whatever it takes, the understanding of that, knowing
that you can’t force somebody to pay something they can’t. And the questions are easy, and
the answers are easy, and I think there are more people in this industry that do that. I just happened to be sitting next to a guy
that’s in this business, and I heard him oversay the same conversation that I have every day.
He talked to a customer while we were sitting here and said, “Well, ma’am, what can you
pay?” and there was a figure mentioned. He said, “Okay. We’ll take that over the next
4 months, and you’ll pay off your debt.” I think that’s more common than you could possibly
imagine in this industry. Certainly, in our business, it’s one of our core values. We
do it. Hear, hear. [Applause.] Thank you, Mr. Hunter. Blaine Dixon. Blaine Dixon. [No response.] Richard Chambers. Good afternoon. I know we have all been here
a long time. I’ll try to be brief. I’ve been in the consumer finance industry,
the banking industry, a consultant to the alternative credit industry in almost every
one of its forms, beginning in the mid-1960s. I would offer the perspective today that I
am not speaking on behalf of any specific client. There were a couple of points made that I
wanted to speak to from my own research into the customer basis of my clients and specifically
into the bankruptcy filings across my clients. First, the consumer of the payday product,
the consumer of the title product, the consumer of credit card product, to some extent, particularly
the secured card, had 9 to 12 life emergencies a year. So I think you need to keep that in
mind, that many of the consumers are continually having a problem making ends meet, and these
companies are doing a great job of solving that problem. One of the interesting things in my research
is that many of the borrowers view this industry in particular as a venture capitalist for
them, and they have no other source of capital. This idea of the debt trap and the cycle of
debt is so ridiculous to me, because the consumer has made a conscious choice that they are
going to continually live beyond their means for various reasons. We could cite hundreds
of reasons, and as a result, they find that that gap is filled by a venture capitalist
at a venture capitalist return. I think the industry is doing a good job of
serving all of its customers, and I would urge the CFPB to carefully study bankruptcy.
I find in my study of bankruptcy filings only 11 percent of the borrowers are borrowing
from payday institutions. The average unsecured debt is 8- to $13,000. You don’t get that
under most state laws from a payday lender. You get that from a variety of lenders. So
I think Thank you, Mr. Chambers. Thank you. [Applause.] Janine Geeky [ph]. Hello. I am a payday loan consumer and have
been for probably 10 or 12 years, and I’d like to say it’s always been extremely clear
what the cost of borrowing that money is. It can’t be much simpler than you’re going
to borrow 200 and pay back 230. I feel more abused by the banking industry
who, if I overdraft my account $1, will charge me $35. I heard people talk about 400 percent
interest. I’m pretty good with math, but I can’t even tell you what that interest rate
would be. And nobody has talked about the family who
can’t pay the electric bill when the electricity gets turned off. They’re going to be charged
$150 to turn it back on. Nobody is concerned about those fees, and these are the kind of
things that I’ve had a payday loan work for me over the years. I’ve always known that
I could rewrite that loan at a lower amount each time to pay it off, if I couldn’t pay
it all off in full, and I found the people that work at the payday loans to always be
above and beyond to explain to me what I’m paying for, for the service they’re giving,
and what services they have available, because it isn’t a one-size-fits-all, and they do
have more than one product, depending on what the situation might be for the consumer. So I think it would be a real disservice to
the people who don’t have access to a pocketful of credit cards or a banker they can call
for a personal loan to try to limit this industry, because those are the people who need this
service the most. Credit cards take 17 years to pay off, the average credit card. Nobody
is complaining about their fee. Thank you, Ms. Geeky. [Applause.] Robert Geeky. Hi. My name is Bob Geeky. I’m disabled and
get a monthly check, and I’ve used the places for, oh, probably have 10 years for incidentals,
like if your water bill is higher than it should be or your dog breaks its leg or you
blow out your tires in your car, the bank is not going to loan you 2- or $300. They
are going to want $2,000 from you. So going to them is a quick fix. If you can’t pay it
back, you shouldn’t borrow it. I know sometimes it doesn’t work out that way. Your intentions
sometimes are good. It doesn’t work out, but I think it’s a great thing that they have
come out with to help you out of a tight jam, and they work with you to help you get through
it and make it easier for your life. Thank you, Mr. Geeky. [Applause.] Clarissa Griggs. My name is Clarissa. I’ve worked for a payday
loan company about 2 years now, and I’m very proud to work for a payday loan company, just
because I’m proud to be able to help people. I know that myself, I’ve been in a jam before,
before I started working for this company, and I was able to go and borrow money to get
help. And just like everybody else has been saying, it’s hard to go to a bank. And you
might not even necessarily need as much money as the bank is willing to lend, so it’s easier
to be able to go somewhere that, like she said, they don’t judge you. You just go in. And like she said also, we do look at the
ability to be able to pay it back. So I’m proud to be able to help people who and also
like the lady in the front there said, we also do help with the community. It’s not
just to loan money out. We’re not predators. We’re not looking to try to hurt anybody.
We’re not looking to try to make people’s lives miserable. We’re just trying to help,
and we’re also wanting to help in the community too. So I’m proud to be able to work for a
company that does provide those services. Thank you, Ms. Griggs. [Applause.] Russ King. I am Russ King. I’m a minister at the Donelson
Church of Christ, right down the road, and I met yesterday with a man I’m doing my retirement
planning with. And I’m glad my stock has increased a little bit over this past year. I drive a 15-year-old car. It’s paid for.
I’ve got a house that I have a mortgage on, be paid off in about 3 or 4 years. I’ve got
a big-screen TV. I majored in Bible, but I minored in business. The business of business
is business and to make money, and I appreciate free enterprise and free market. There is
no other country in which I’d rather live. [Applause.] And I want to say thanks to the CFPB being
with us and the high level of discussion from both sides. I think you state your cases very
well. I am concerned about the exorbitant rate of
interest. That’s a concern to me. Our church last year, just one church in town, helped
over 2,000 families 2,000 families with food and clothing. We also, like the Maury Hills
gentleman, tried to be proactive in helping educate people financially. We helped one
family how had need of a short-term loan, and you certainly do meet needs that some
of the banks don’t. A bank is not going to loan you 500 bucks, and according to CNN Money
today this is off today’s payday loans are typically for 500 or less, but the fees that
are carried are a concern. So one particular family we helped, we were able to reduce their
loan from a payday loan on their title loan, on their car, and saved them $250. So I think
education is important. Can we conduct business and protect people?
Can we make money without being exorbitant and doing it on the backs of people and holding
them down? Thank you. Thank you, Mr. King. That concludes the audience participation
portion of today’s field hearing. I want to thank you for taking the opportunity to tell
us what you are seeing in your communities, and thank you for the opportunity to listen
to you. Cheryl, you have the floor. Thank you, Zixta, and thank you all for being
with us today for the public portion of today’s field hearing. Thank you for taking the time
to join the CFPB, and thank you to all who have watched us via live stream at
This concludes today’s Field Hearing at the Country Music Hall of Fame in Nashville, Tennessee.
Have a great afternoon. [Applause.]

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