Richmond, VA: field hearing on Payday loans

Welcome. Welcome to the Consumer Financial
Protection Bureau’s public field hearing in Richmond, Virginia, at the Greater Richmond
Convention Center. At today’s field hearing, you will hear from Director Richard Cordray,
Deputy Director Steve Antonakes, and a panel of distinguished experts who will discuss
payday lending. The Consumer Financial Protection Bureau,
or the CFPB, is an independent federal agency whose 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. My name is Zixta Martinez. I’m the Associate
Director for External Affairs at the CFPB. Our audience today includes consumer advocates,
industry representatives, state and local officials, and, of course, consumers. We are
especially pleased to have in the audience Attorney General Mark R. Herring and Bureau
of Financial Institutions Commissioner Joe Face. We are also pleased Let me spend just a few minutes telling you
about what you can expect at today’s field hearing. First, you’ll hear from General Herring,
then Commissioner Face, after which you’ll hear from CFPB Director Cordray who will provide
remarks about payday lending. Following the Director’s remarks, Deputy Director Steve
Antonakes will frame a panel discussion on the same subject. After the discussion, there
will be an opportunity to hear from members of the public. Today’s field hearing is being livestreamed
at, and you can follow CFPB on Facebook and Twitter, #EndDebtTraps.
So let’s get started. Attorney General Herring became the 48th Attorney
General of Virginia on January 11, 2014. General Herring got his start in public service as
the town attorney for Lovettsville, and then was elected as a member of the Loudoun County
Board of Supervisors. Prior to serving as Attorney General, he served 8 years in the
Senate of Virginia, representing parts of Loudoun and Fairfax counties. The Office of
the Attorney General is the commonwealth’s law firm, which represents the interests of
the people of Virginia. The office also represents the Virginia state government and the state
agencies, boards and commissions that compose it. General Herring?
Good morning. Thank you very much, Ms. Martinez, for that introduction, and it is great to
be with Commissioner Face and Director Cordray. Welcome to Richmond. Thank you for coming
to Virginia, and, more importantly, thank you for shining a spotlight on this issue. Director Cordray is actually a former attorney
general from Ohio, so it is great to know that we have someone at the helm of the CFPB
who understands the job and the role of state attorneys general in protecting consumers.
A few months ago, he spoke about predatory lending at the National Association of Attorneys
General, and his address really helped sharpen my focus on these issues. So, again, thank
you, Director Cordray, for being here and thank you for being such a great partner with
my office and other attorneys general in protecting our citizens. As attorney general, it is my job to look
out for Virginia consumers. My office and I are the voice of consumers on regulatory
matters like electric rates, and we defend your rights when businesses try to take shortcuts,
or abuse consumers, or exploit consumers with illegal business practices. It’s a duty I
take seriously, and we’ve been able to do some really good work over the last year.
Just a few months ago, we partnered with Director Cordray and the CFPB to end some really egregious
debt collection practices by a company called Freedom Furniture and Electronics that was
targeting veterans, military service members, and their families. We’re going after big
Wall Street investment banks that defrauded Virginians and our state government retirement
system during the height of the mortgage and financial crisis. And we do great work on
behalf of individual consumers each and every day. Maybe somebody’s cable company didn’t
return the $16.82 for a cable box return, but we’re going to fight for them, on matters
large and on matters small. We are going to fight for the rights of Virginia consumers. But there’s one place where we need to do
more, and we’re going to do more. I read, a few weeks ago, that Virginia is now considered
the predatory lending capital of the East Coast, and I cannot accept that. It hurts
our reputation as a state, and more than that, it means there are Virginians who are being
hurt. I cannot accept that, and we should be ashamed of it. Back when I was in the Senate, I worked to
crack down on predatory lending, and we enacted some regulations on those operations, though,
in my view, they didn’t go nearly far enough. While we made some important reforms with
respect to payday loans, we saw abusive tactics shift to title loans and then open-end loans.
We’ve learned that some of these lenders are creative, and determined, and unfortunately
too many are willing to play fast and loose with the rules, even at the expense of Virginia
consumers. Well now I’m in a new role, as attorney general,
and we have some resources and authorities that I think have been underutilized, and
I am tired of seeing our citizens get taken advantage of and their financial lives ruined
just because they found themselves in a difficult situation, and I’m not going to stand for
it. In addition to some really good news that
Director Cordray is going to be discussing later, I’m really excited to announce today
that we’re going to be launching a multi-faceted effort, from the Attorney General’s Office,
to fight predatory lending, right here in Virginia. By May 1st, I will have on my desk
a plan for reorganizing and revitalizing my consumer protection section, with a core focus
on fighting predatory lending. This is a process that is already underway, and we are exploring
a number of strategies, including enforcement actions against lenders who withhold terms
or operate outside of their licenses; education and prevention through financial literacy
resources that we can make available on revamped consumer protection website; strengthened
and expanded partnerships with the CFPB or other states when we need additional resources
or when bad actors are crossing state lines; a reexamination of our statutory authority
to see if we need additional tools to help protect Virginia consumers, or whether additional
legislation is needed to close loopholes that lenders have exploited; and we may even look
at some ways to encourage and support financial tools like low-dollar loans, that meet the
needs of Virginians without ensnaring them in an endless cycle of debt. You all know, and I know, that too many Virginians
are getting caught in financial quicksand with these products, that in some cases are
designed to fail the second they’re made. The status quo is not working for Virginians
and we are now taking a closer look at the situation here in Virginia. We’re looking
at what our office has done and what we can do to protect Virginians from predatory loans.
And today is a big part of that process. I have my entire consumer protection team here,
because we want to hear from Director Cordray, Commissioner Face, our assembled experts,
and, most importantly, from the public, about what’s going on and how we can protect Virginians. As we’re working to determine the best way
forward for our office, we look forward to working collaborative with the public, our
partners at the CFPB, our partners at the SEC, the Poverty Law Center, Virginia Interfaith,
and others to determine what we should do in terms of enforcement actions, education
and prevention, partnerships, new legislation, or other financial tools for borrowers. This is one of my top priorities for this
year, a revitalized consumer protection operation that helps keep financially vulnerable Virginians
out of the debt trap. So, again, Director Cordray, thank you for
coming here, thank you for shining a light on this problem, and I look forward to hearing
more from you today about federal efforts, and I hope you know that you will always have
a partner ready and willing to help you in your efforts. So thank you for coming.
Thank you, General Herring. Commissioner Face has been the Commissioner of Financial Institutions
for the Virginia State Corporation Commission’s Bureau of Financial Institutions since 1997.
The Bureau is the second-largest division of the State Corporation Commission of Virginia.
The Commission is unique. It is constitutionally organized as the fourth branch of government
in Virginia, with its own legislative, administrative, and judicial powers. The Bureau regulates
and supervises over 8,000 state-charted financial institutions and licensees, controlling some
$80 billion in assets. Commissioner Face?
Well, thank you, and let me offer my welcome to Richmond, Mr. Cordray, Mr. Attorney General,
Deputy Director Antonakes. Thank you for coming. The first payday loan legislation in Virginia
was introduced in January of 1999. Various amendments to the law have occurred since
then, with the most significant changes in 2008, when a number of consumer protection
provisions were added, such as a database of loans, the cooling-off period, and a one-loan-at-a-time
provision. At the end of 2002, there were 49 payday loan licensees operating 377 offices
in Virginia, having made 604,000 loans. These numbers peaked in 2007, with 84 licensees
operating 832 offices, making some 3.3 million loans. Interestingly, at the end of 2014,
there were 20 licensees operating 224 offices, having made 422,000 loans. Nationwide, states have been supervising payday
lenders since the early 1990s. However, payday lending coverage is varied across the states,
with each sovereign legislature determining the appropriate economic and consumer protection
structures for their constituents. In 2014, the states began conducting coordinated examinations
of payday lenders with the Consumer Financial Protection Bureau. This is part of a larger
coordinated supervision initiative agreed-to by 63 state regulatory agencies and the CFPB.
Under the initiative, coordinated payday lending examinations are and will be conducted in
2015. The states, through the National Association of Consumer Credit Administrators, and under
the guidance of the Conference of State Bank Supervisors’ State Coordinating Committee,
are currently in the process of developing a multi-state payday lending examination structure. The Virginia Bureau of Financial Institutions
has made very good contacts with the CFPB, and has shared information pursuant to a memorandum
of understanding between the CFPB, our bureau, and the Conference of State Bank Supervisors.
As a matter of fact, in 2013, our staff assisted the CFPB examination team on its Virginia
branch examinations of a nationwide payday lender. The CFPB and the states have established
a good relationship and continue to share information and enhance examinations. Thank you very much, and I look forward to
the hearing. Thank you, Commissioner Face. I’m 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 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?
Thank you, Zixta. Thank all of you for joining us in Richmond for this field hearing. When
I was originally appointed to serve as the Director of the Consumer Financial Protection
Bureau, we decided to hold our first field hearing in Birmingham, Alabama, on the topic
of payday lending, the same subject we are addressing here today. That was in January
of 2012. These issues generated intense interest then, and as we can see from today’s turnout,
they continue to generate intense interest today. We have seen and heard and felt that
same deep and passionate interest from a great many people in a wide range of settings across
the United States. Over the past 3 years, we have engaged in
intensive analysis of the short-term and longer-term credit markets for personal loans. We have
considered the history of the demand for such loans and the conditions that create such
demand. We have also focused carefully on how people are affected by the kinds of credit
products that have evolved to meet this demand. As we first said in Alabama, and as we underscore
again today, we believe that many people who live on the edge need access to credit that
can help them manage their financial affairs. But we have also emphasized that the market
for such credit products must be marked by responsible lending that helps rather than
harms consumers. Extending credit to people in a way that sets them up to fail and ensnares
considerable numbers of them in extended debt traps, is simply not responsible lending.
It harms rather than helps consumers. It has deserved our close attention, and it now leads
to a call for action. So after much study and analysis, we are taking
an important step today toward ending the debt traps that are so pervasive in both the
short-term and longer-term credit markets. Today we are outlining a proposal that would
require lenders to take steps to make sure borrowers can actually afford repay their
loans. The rules we are considering would cover payday, vehicle title, and certain high-cost
installment loans. We have released an outline of the proposals we are considering, and we
invite feedback on our approach. This is the first step in addressing much-needed change. Before I discuss more specifics, it seems
important that we first take a step back to get more perspective. Consumer credit is a relatively modern phenomenon,
which grew up with the rise of the money economy itself and developed initially as a means
of enabling consumers to make a purchase. At one time, that purchase might have been
dry goods from the community’s general store; today, it could be a home or an automobile,
or other items. The advantage of consumer credit is that it lets people spread the cost
of repayment over time. Until recently, a bedrock principle of all consumer lending
was that before a loan was made, the lender would first assess the borrower’s capacity
to repay the loan. In a healthy credit market, both the borrower and the lender succeed when
the transaction succeeds—the borrower meets his or her need and the lender gets repaid. What we have observed is that in the markets
we are discussing today, many lenders make loans based not on the consumer’s ability
to repay but on the lender’s ability to collect. The ability to collect is often fueled by
modern technology that allows the lender to obtain electronic access to the consumer’s
checking account or paycheck. A lender that acquires such access can then move to the
head of the line and obtain payment as soon as money reaches the account or, in the case
of payroll access, even before the money gets to the account. But collectability can also
be achieved through less sophisticated means, such as by holding a postdated check or a
vehicle title. Our research and analysis indicates that when loans are made based on the ability
to collect, consumers are put at serious risk. With payday loans, vehicle title loans, and
many types of installment loans, the pattern is all too common. A consumer facing difficult
financial circumstances is offered quick cash with no questions asked and in return agrees
to provide access to a checking account or paycheck or vehicle title in order to get
the loan. No attempt is made to determine whether the consumer will be able to afford
the ensuing payments—only that the payments are likely to be collected. Indeed, in many
of these markets the lender’s business model often depends on many consumers being unable
to repay the loan and needing to borrow again and again while incurring repeated fees. By providing the lender with an easy means
of collection or, in the case of vehicle title loans, with power over the consumer’s means
of getting about, the lender can trump the consumer’s own discretionary choices about
budgeting and spending. At that point, the consumer is left unable to choose, for example,
between repaying the loan and paying rent or covering food or medicine or other pressing
needs. If the lender is able to exert a stranglehold over the consumer’s funds, the consumer may
fall behind on her rent or utilities and fall deeper into debt. Often, the only alternative
that these lenders present to consumers is to pay a new set of fees to roll the loan
over and defer the day of reckoning. For many consumers, that choice repeats itself time
after time, pushing the consumer further and further into a debt trap. Some consumers may
attempt to climb out of the debt trap by taking out additional loans at the same time, which
only compounds their financial difficulty. In order to understand the magnitude and nature
of the debt traps that can ensnare consumers, we need to gain a more complete understanding
of the true costs of such loans to the borrower. Certainly the loans can seem quite costly
on their face, with high annual percentage rates and especially where they lead to repeated
rollovers with cascading fees. All of those costs are paid by the borrower to the lender
over time. But when we evaluate the further trajectory
of these loans, we can begin to comprehend many additional costs that can end up being
paid to parties other than the lender. Some consumers will not have enough money even
to pay the fees to roll over the loan when it is due. In some instances, the lender may
nonetheless succeed in collecting repayment by overdrawing the consumer’s deposit account.
If so, the consumer will be charged at least one overdraft fee, and depending on the timing
of other transactions the consumer might be charged repeated overdraft fees. That is not
uncommon. But even that is not the whole picture—other
steps may add further costs along the way. In certain instances, when the lender goes
to collect on the unpaid loan against the consumer’s deposit account, the bank or other
depository institution may reject the transaction. When that happens, the consumer will incur
“insufficient funds” fees. And when the lender’s collection efforts are thwarted in this way,
it may respond by making repeated, unsuccessful attempts to withdraw the funds, leading to
multiple charges with each attempt. Some lenders even break up the total amount they are owed
into smaller amounts and put them through the payment system in pieces that generate
multiple fees for each piece, to collect on what started out as a single unpaid loan. After a period of time, some consumers will
end up facing the closure of their accounts due either to the overdrafts or the piling
up of fees, or both. This exposes consumers to yet more fees as well as the costs, in
time as well as money, of either having to establish another deposit account elsewhere
or having to arrange for financial services outside the banking system altogether, which
carries its own set of costs and risks. These scenarios also will have negative effects
on consumers’ credit reports, causing further damage to their financial lives. Of course, collection efforts do not end with
attempts to debit the consumer’s bank account. Even though no attempt was ever made at the
outset to determine whether the consumer could afford to repay, the consumer is still expected
to do so. Consumers are thus exposed to standard—and, in some markets, non-standard—debt collection
methods. These range from repeated telephone calls to worksite visits to debt collection
lawsuits that can lead to wage garnishment. Debt collection efforts generate a further
array of fees and charges visited upon the original borrowers, which can include the
potential cost of having to defend against collections lawsuits. These encounters also
exact a personal toll on consumers that disrupts their lives. The extent of that disruption
can be hard to quantify, but consumers who experience it often find it to be quite substantial.
And finally, another significant cost of a defaulted loan that turns into a court judgment
is the blemish on the consumer’s credit report, which may result in blocking the consumer
from accessing affordable credit for an even longer period into the future. Each of these additional consequences can
be significant, and together they may impose massive costs that go far beyond the amounts
paid solely to the original lender. So the true costs, taken in the aggregate, of a lending
model that rests on the ability to collect, rather than the ability to repay, must be
kept in mind as we assess the effects on consumers, especially those who were already experiencing
financial difficulties when they took out the loan in the first place. We recognize that consumers have a legitimate
need to access credit to meet their particular circumstances, but consumers need credit that
helps them, not harms them. If the lender’s success depends on the borrower failing, market
dynamics are not functioning properly. In these cases, the proper balance between lenders
and borrowers is knocked off course and the “win-win” dynamic of healthy credit markets
is no longer achieved. That is why we are holding this field hearing, so that we can
begin to gain feedback on our approach to these issues. Today we are outlining a framework that would
put in place strong federal rules for both short-term and longer-term credit products.
This framework is the product of extensive research, analysis, deliberation, and outreach.
We recognize that it is challenging to determine the best way to address consumer harm in these
markets while still leaving room for affordable credit. So we are releasing a preliminary
outline of the proposals we are considering. We welcome feedback from small businesses
and all other affected stakeholders, including consumers and providers alike. Our formal
and deliberative process will lead to fundamental decisions about the proper direction of change
in this important marketplace. Our proposed framework would provide two different
approaches: debt trap prevention and debt trap protection. Under the prevention requirements,
lenders would have to take appropriate steps at the outset to determine that consumers
will not fall into debt traps. Under the protection requirements, lenders would have to comply
with various restrictions designed to ensure that the consumer can affordably extract themselves
from the loan over time. Lenders could choose which set of requirements to follow. The proposals
under consideration also would restrict lenders from accessing consumer deposit accounts in
ways that cause consumers to lose control of their own finances and that tend to rack
up high fees paid to financial institutions and other parties. We believe these measures
could dramatically improve outcomes in these markets. Consumers would still be able to
get the credit they need, but they could do so within a framework of strong consumer protections
under federal and state law. Under our proposed framework, we define the
short-term credit market as loans for 45 days or less. These are typically payday loans
or vehicle title loans, but one important feature of our rules is that they would apply
to any lender using similar short-term loans. The rules thus would cover all firms that
offer competing products in this segment of the market through any channel, including
both storefront and online lenders. Our proposals to address these short-term
loans are based in part on extensive research we have done on the market for payday loans
and deposit advance loans, our careful review of the many research studies that others have
done on this and related markets, and our discussions with stakeholders on all sides.
Based on our review of millions of transactions, we found in our own research that for about
half of all initial payday loans, borrowers are not able to repay the loan without renewing
it. More than one in five initial loans turns into a repeating series of seven or more loans.
The amounts that people borrow in each successive loan in the series is usually the same or
more as the initial amount borrowed, leaving many consumers mired in debt while lenders
continue to receive their repeated fees. Our proposals under consideration would seek
to establish strong protections for these short-term loans so that consumers are able
to borrow but are not set up to fail. Lenders would have two alternative ways to meet this
requirement: either prevent debt traps at the outset or protect against debt traps throughout
the lending process. As Benjamin Franklin sensibly said, “An ounce
of prevention is worth a pound of cure.” So the prevention requirements we are considering
would help ensure, at the outset, that consumers can avoid debt traps. Specifically, the proposals
under consideration would require the lender to make a reasonable determination that the
consumer could actually repay the loan when it comes due without defaulting or re-borrowing.
This requirement applies to the whole loan, including the principal, the interest, and
the cost of any add-on products. Lenders would have to engage in basic underwriting by verifying
the consumer’s income, major financial obligations and borrowing history, and determining that
the consumer can meet their obligations, cover basic living expenses, and cover payments
on the loan. If the consumer returns for an additional
short-term loan before the consumer has had time to regain her financial footing, lenders
would have to confirm that some change in circumstances has occurred that would make
the new loan affordable even though the consumer has been unable to escape the debt. In cases
where the consumer takes out three loans in close succession, there would be a mandatory
60-day cooling-off period after the third loan to give the consumer enough time to recuperate
financially before borrowing again. This would prevent lenders from taking advantage of consumers
caught in a financial rut by prohibiting long sequences of loans that trap consumers in
debt. While the prevention requirements would primarily
apply at the moment when the borrower takes out the loan, the alternative protection requirements
under consideration would apply throughout the life of the loan. We are considering two
alternatives. Under the first alternative, lenders would have to decrease the principal
amount for each subsequent loan so that after three loans the debt is fully paid off. At
that point, a 60-day cooling-off period would kick in. Under the second alternative, when
the borrower still cannot repay after two rollovers, the lender would have to offer
the consumer an off ramp consisting of a no-cost extended payment plan. After that, a 60-day
cooling-off period would apply. Under either approach, the lender could not lend more than
$500 or take a security interest in a vehicle title, and the lender could not keep the consumer
indebted on these loans for more than 90 days in a 12-month period. These measures are being carefully considered
to help consumers avoid spiraling into long-term debt. The financial incentives for the lenders
would change significantly because loan rollovers could not continue indefinitely. In the end,
the proposed framework under consideration for this segment of the market is designed
to achieve one crucial objective: to allow for responsible lending while ensuring that
short-term loans do not turn into long-term cycles of debt. The second part of our proposal today covers
certain longer-term, higher-cost loans. More specifically, the proposal under consideration
would apply to credit products of more than 45 days where the lender has access to the
consumer’s bank account or paycheck, or has a security interest in a vehicle, and
where the all-in annual percentage rate is more than 36 percent. These types of installment
and open-end loans cause us great concern. Not only are they high-cost credit, but the
lender secures a special form of preferential control over the consumer’s ability to manage
his or her own financial affairs, which, as we have seen, is dangerous and potentially
disabling. Once again, the proposed framework under consideration
here would address the problem of debt traps by establishing strong requirements to help
ensure that borrowers can afford to repay their loans. Just as with short-term loans,
lenders would have a choice between two alternative ways to meet this requirement: prevent debt
traps at the outset or protect against debt traps throughout the lending process. As with short-term credit products, the debt
trap prevention requirements would mean the lender must determine, before a consumer takes
out the loan, that the consumer can repay the entire loan—including interest, principal,
and the cost of add-on products—as it comes due. For each loan, the lender would have
to verify the consumer’s income, major financial obligations, and borrowing history to determine
whether the borrower could make all of the loan payments and still cover her major financial
obligations and other basic living expenses. If the borrower has difficulty repaying the
loan, the lender would be barred from refinancing the old loan upon terms and conditions that
the consumer was shown to be unable to satisfy in the first place. Instead, as with our framework
for short-term loans, the lender would be required to document that the consumer’s
financial circumstances have improved enough to take out yet another such loan upon the
same terms and conditions. Alternatively, lenders could adhere to the
debt trap protection requirements. We are considering two approaches here. Under both
approaches, lenders could extend loans with a minimum duration of 45 days and a maximum
duration of 6 months. Under the first approach, lenders would generally be required to follow
the same protections as loans that many credit unions offer under the National Credit Union
Administration’s existing program for “payday alternative loans.” These loans protect consumers
by charging no more than 28 percent interest and an application fee of no more than $20.
Under the second approach, we are considering limiting monthly loan payments to no more
than 5 percent of the consumer’s monthly income. This would shield the bulk of their income
from being eaten up by repayments, while the 6-month limit also prevents the payments from
extending in perpetuity. The proposed framework here is thus designed
to protect consumers against high rates of default or re-borrowing that tend to aggravate
their underlying financial problems while preserving their access to affordable credit.
As we go along, we welcome further input on how we can best address the issues consumers
face in these credit markets. We are focused on finding solutions that put an end to irresponsible
lending practices too often based on the lender’s ability to collect rather than the consumer’s
ability to repay. We are also considering new consumer protections
about when and how lenders are able to access consumer accounts. To mitigate the problems
of racking up excessive overdraft and insufficient funds fees, we are weighing two measures:
requiring lenders to notify borrowers before accessing their deposit accounts, and protecting
consumers from repeated unsuccessful attempts to access their accounts. The first provision would require lenders
to give notice to consumers 3 business days before trying to withdraw funds from the account,
including key information about the forthcoming attempt. The goal here is to protect consumers
by giving them more information to help them plan how to manage their accounts and their
overall finances. The notice provision would prevent nasty surprises when the consumer
goes to see what money they have in their account. It would help them avoid unexpected
problems such as a rent check that bounces because a payday or installment lender already
got to their account first. The second provision would require that if
lenders make two consecutive unsuccessful attempts to collect money from consumers’
deposit accounts, they could not make further attempts to collect from the account unless
the consumer provided them with a new authorization. This would help avoid an unexpected cascade
of debilitating overdraft or insufficient funds fees incurred by multiple collection
attempts. The goal behind these parts of our proposal
is to block lenders from harming consumers by abusing their preferential access to the
consumers’ accounts. Of course, lenders that are owed money are entitled to get paid back,
but consumers should be able to maintain some meaningful control over their financial affairs,
and they should not be subject to an array of fees and other costs that can be generated
entirely at the whim of the lender. The harms to consumers that we have observed
in the short-term and longer-term credit markets for personal loans demand an appropriate policy
response. As Virginia’s own Thomas Jefferson once said, “The care of human life and happiness,
and not their destruction, is the first and only object of good government.” And that
is why today we are issuing a call to action. The proposed framework under discussion reflects
rigorous thinking by our colleagues at the Consumer Bureau. In addition to our own extensive
research, we have had many discussions with consumers, industry, other federal agencies,
state and local regulators, academics, and other interested parties. Our outreach efforts
have covered both depository and non-depository lenders that offer payday loans, deposit advance
loans, vehicle title loans, installment loans, or other similar loans. We are releasing this outline to kick off
our efforts to solicit specific feedback from small entities that will be affected by this
rulemaking. As we are getting this feedback, we will also continue to consult with consumers,
industry, and others. We will then formally issue a proposed rule and provide opportunity
for everyone to comment. We will move as quickly as we reasonably can, but we will be thoughtful
and thorough as we continue this work, in accordance with our best lights about how
to address these issues. In the end, we intend for consumers to have
a marketplace that works both for short-term and longer-term credit products. For lenders
that sincerely intend to offer responsible options for consumers who need such credit
to deal with emergency situations, we are making conscious efforts to keep those options
available. For consumers who need more time to repay, there should continue to be opportunities
available for affordable installment loans. But lenders that rely on piling up fees and
profits from ensnaring people in long-term debt traps would have to change their business
models. Consumers should be able to use these products without worrying that they will end
up stuck in a deep hole with no way out. We urge you to join us in helping to achieve
that goal. Thank you. Thank you, Director Cordray. At this time
I’d like to invite the panelists to please take the stage. While they’re doing so, I’ll
briefly introduce them. Steve Antonakes serves as the Deputy Director
as well as the Associate Director for Supervision, Enforcement, and Fair Lending at the CFPB.
He is responsible for the supervision of all banks and non-banks under the CFPB’s jurisdiction,
and the enforcement federal consumer protection and fair lending laws. We also have with us Delicia Hand, Staff Director
for the Bureau’s Consumer Advisory Board and Councils, and Kelly Cochran, the Assistant
Director for the Office of Regulations. Our guest panelists include Lisa McGreevy,
President and CEO for the Online Lenders Association; Edward D’Alessio, Executive Director for the
Financial Service Centers of America; D. Lynn DeVault, board member, Check Into Cash, and
board member, Community Financial Services Association of America; Stan Leicester, Vice
President and Chief Financial Officer for the BayPort Credit Union; Wade Henderson,
President and CEO of the Leadership Conference on Civil and Human Rights; Dana Wiggins, Director
of Outreach and Financial Advocacy for the Virginia Poverty Law Center; Mike Calhoun,
President of the Center for Responsible Lending; and Paulina Gonzalez, Executive Director for
the California Reinvestment Coalition. Steve, you have the floor.
Thank you, Zixta. Good afternoon, everyone. My name is Steve Antonakes. I serve as the
Deputy Director of the Consumer Bureau. It is a pleasure to be with you today and to
chair this portion of our field hearing on payday lending. We will hear from a number of respected panelists
today. They include advocates from the civil rights, faith-based, and consumer advocacy
communities, from across the country and at the local level. In addition, we have a broad
spectrum of national, regional, and local small-dollar lenders, including payday lenders,
credit unions, and trade associations. Each panel member will give us some background
and provide their perspective on payday and small-dollar lending. We will then engage
in a discussion of the varied opinions about the benefits, concerns, and innovations in
this market, and the panelists’ thoughts on possible reforms. This will be followed by
the audience testimony component of the hearing, where we will hear from audience members who
have signed up to speak. Director Cordray has summarized the steps
the Bureau is taking today in the process of implementing strong federal rules for short-term
and long-term credit products. As you have heard, the outline of proposal we are considering
would apply to payday loans, vehicle title loans, and certain installment loans. These
proposal would apply equally, regardless of whether the loans are made a storefront locations
or online, or whether the lender is a depository institution or a non-bank lender. Our panel
members represent this diversity in the marketplace. Before we begin our panel discussion, let
me note that the outline of proposals is available on the Bureau’s website at,
and I encourage all of you that are interested to review the complete outline. Each panel member will have 1 minute to make
a brief opening statement, and I will ask all of our panel members to please adhere
to this 1-minute limit, in deference to the many audience members who wish to speak this
afternoon. We will have a staff person in the front row who will be giving you cues
on time, and be forewarned, if you go much beyond that 1 minute, that I will cut you
off. First we will start with Lisa McGreevy. Lisa
serves as the President and CEO of the Online Lenders Alliance. Lisa.
Great. Thank you, Director. Good afternoon. I’m Lisa McGreevy and I’m so pleased to be
here today to share with you the views of the Online Lenders Alliance. We represent
the growing industry of financial technology companies in this space. I think it’s fitting
that we’re here in the commonwealth, because it’s really become a hub for technology and
innovation, two principles that we have brought to short-term lending in order to provide
access to credit. As a nation, we are increasingly living our
lives on the go. I venture to guess that most everyone in this room has with them their
smart phone today. We use the Internet to manage our day-to-day activities, our children’s
school assignments, paying our bills, as well as being in constant communication. People
shop for credit the exact same way. So as we proceed, I’d like to suggest three principles.
First, any rule must allow for innovation and changes in technology. The rules need
to ensure that consumers will be able to access credit from the convenience and safety of
their homes. Secondly, the rule must preserve consumer convenience. Millions of consumers
use the convenience of recurring payments to pay for lots of different things, and they
should be able to do so with these products. And last, I think that determining the ability
to repay must be consistent with Internet technology. Standards should not be rigid
or overly prescriptive. We support strong protections for consumers,
many of which are already contained in our best practices. We look forward to working
with the Bureau and with everybody in this community to make sure that we preserve access
to credit. Thank you. Thank you, Lisa.
Next we have Edward D’Alessio, Partner of Winne and Banta, and General Counsel for Financial
Service Centers of America. Thank you, Deputy Director. My name is Edward
D’Alessio and I’m the Executive Director of Financial Service Centers of America, also
known as FSCA. FSCA represents 5,000 retail financial service center locations throughout
the United States. Our members offer payday loans and installment loans, along with check-cashing,
wire transfers, bill payments, and prepaid card products. We are currently analyzing
the materials released today by the CFPB in connection with today’s hearing, and I will
not comment specifically on them at this time, except to say that we anticipate if they promulgated
in their current form, they will have a significant impact on FSCA members and upon our customers.
Our preliminary review indicates customers will lose many of the credit options currently
available to them, without any real benefit. We also believe labeling products as debt-traps
is a criticism directed to the consumers who use those products, and says they are not
sufficiently intelligent to avoid pitfalls. We believe to the contrary. Our customers
are intelligent and responsible, and make difficult but rational financial decisions
every single day, based on their own judgment of what is right for them. We are here today because of SBREFA process
requires this to be the start of the rulemaking process. FSCA’s membership is primarily small
entities. Almost 90 percent of our 400 separate member companies operate fewer than 10 locations.
Close to 80 percent operate a single location. These small companies are locally based businesses,
serving the communities in which they are located, many of which are rural communities.
We hire from our communities. Our employee base is very diverse. Approximately 80 percent
are women. More than two-thirds are minorities. FSCA members offer above-minimum-wage jobs,
health and retirement benefits, and careers. FSCA members are Main Street businesses. A
rulemaking that causes FSCA members to close their doors will severely impact these hard-working
employees and their families. FSCA members’ businesses exist solely because
of consumer need for small amounts of credit—when it is needed, where consumers live, and in
a manner in which their privacy and dignity are respected. FSCA members enjoy more than
100 million customer visits per year. All of our products are fully transparent. All
fees are prominently displayed. Our customer satisfaction ratings are extremely high. These
are not facts that support a conclusion that our products are debt traps. Our products are also available to borrowers
who need credit immediately. The payday loan product is straightforward and easy to understand.
Rules that make a basic product more difficult to understand will not help consumers but
will drive them to quick fixes, which are often unregulated loans from informal, even
nefarious sources. Thank you, Edward. We have to move on. Thank
you. Next we have Lynn DeVault, Board Member, Check
Into Cash, Board Member, the Community Financial Services Association of America.
Check Into Cash was a founding member of CFSA, and I served for 10 years as its Chair. I
recently celebrated 15 years with my company and I’m very proud to do so. But in addition
to speaking for Check Into Cash and also for CFSA, I’m here to speak on behalf of the consumers,
whose voice is really not frequently heard, or as frequently as it should be. Typically,
the consumer advocates seem to have a louder voice, and some of these proposals that are
in this paper today really leave consumers worse off and certainly with fewer options. We’ve learned, through the years, in our experience
of advising state policy, that regulations must be supported by data and research, some
of which Ed mentioned, and not by anecdotes and presumptions that so often are provided
by the industry critics, and seem to be reflected in some of the information that we received
today from CFPB. CFSA has been working closely with CFPB over
the last couple of years, in an effort to identify greater safeguards and protections.
The industry continues to work to improve products offerings, as documented by Harris
Research and actually by the CFPB’s own complaint portal. Our consumer satisfaction remains
extremely high and the vast majority of our consumers have favorable outcomes from the
use of payday loans, contrary to the presumptions, rather than research, that seem to underlie
some of these positions. While the title of today’s hearing is “Payday
Loans,” CFPB has certainly included all of the other small-dollar and longer-term products
that our companies offer. These are currently regulated by the states, and in my initial
read of this document, it will be extremely difficult to mesh these guidelines with state
laws, if not impossible. It does seem that people who have no need for payday loans are
often leading the charge to eliminate them. The 40 million Americans, middle-income workers,
living paycheck to paycheck, who experience financial shortfalls do not want and can’t
afford the government to limit their access to credit. CFPB’s research and now proposed rules demonstrate
really no understanding in the consumers’ credit needs and the rationale that informs
their credit decisions. CFPB’s proposed rules are not consumer-centered. In fact, they’re
more closely centered on the advocacy group’s belief of what is right for the consumer,
and skewed toward those who wish to eliminate the industry, not a fair regulatory environment
for consumers and providers. Research is key to better understanding of
consumers’ use of small-dollar loans. Many questions remain, including the welfare of
our consumer. There has been no definitive research, no independent research that proves
that these loans harm our consumers. Going forward, we support and accept Director
Cordray’s invitation for continued conversation. We feel like this paper representing the proposed
rules falls way short of what the consumers are going to need, and as hard as we seem
to have worked with CFPB, it is evident that we need to work even harder. But we do want
you to know that we remain a willing partner in this effort and look forward to continuing
our conversations. Thank you, Lynn.
Next we have Stan Leicester, Senior Vice President and Chief Financial Officer of BayPort Credit
Union. Thank you, Steve. Credit unions have been
doing small-business loans since we began, and we continue to do so. Back in 2007, our
credit union decided to start a payday lending program because of what we saw out in the
marketplace, and we wanted to provide a cheap alternative. And with credit unions, generally,
there are two primary objectives—to get the member out of the payday lending cycle
from week to week, and improve credit scores. As a financial institution, we do report their
credit to the credit bureau, and it’s an excellent opportunity for them to pay that loan off
and improve their scores. Specifically, we offer a line of credit. It’s
good for a year. There is a small fee. There is interest rate on it, obviously, and we
require them to take the amount and pay it off within 30 days, and then they can continue
on. That line of credit is good for a year. We feel like our two primary objectives have
been reached. We’ve done over 50 million since we started our program. We’ve converted about
3,300 members out of the payday lending cycle; we’re really proud of that. As of now, we
have 1,800, and when we sit down with a member, we also provide financial counseling if it’s
necessary. We have financial counselors on staff. They can call over the phone and talk
about their finances, et cetera, but our primary objective is to get them out of the cycle. Thank you. Next we have Paulina Gonzalez,
Executive Director of the California Reinvestment Coalition.
Good afternoon. My name is Paulina Gonzalez and I’m the Executive Director of the California
Reinvestment Coalition. In California, although they already high level of payday lending
is not growing but remaining flat, we are seeing an increase in unregulated installment
loans and auto title loans. In 2013, payday lenders made more than 12 million small-dollar
payday loans to 2 million borrowers in California, totaling more than $3 billion in loans. From
2012 to 2013, the number of unsecured, high-dollar installment loans in amounts above $2,500
grew in the range of 51 percent to 104 percent, and auto title loans increased between 41
percent to 55 percent. One of CRC’s members shared this story with
us last week that illustrates the harm of payday lending. Marco had taken a payday loan
from Advance America in Santa Cruz, California, for $300. He was unable to pay the loan back
and it was sold to a collection agency, PMS, a subsidiary of Vantage Point. A PMS representative
told Marco he was from the Financial Crime Unit, threatened Marco with a criminal prosecution
if he did not play the alleged debt of $880. Due to the threat, Marco signed an authorization
allowing PMS to automatically withdraw money from his Bank of America account on a bi-weekly
basis, and PMS eventually withdrew a total of $538.85. Advance America had made a loan
to Marco he could not pay back, that had not been underwritten, and then sold it to a collection
agency that used threatening and illegal tactics to collect more than what Marco had originally
borrowed, ultimately negatively affecting his credit. This consumer story and the growing use of
auto title and installment loans in California illustrate the reasons that we support the
CFPB’s proposed approach to require all lenders—payday lenders, and longer-term installment and auto
title predatory lenders—to either assess a prospective borrower’s ability to repay
the loan offered or to provide a more restricted loan that limits how long a person is trapped
in debt. We believe this is a strong starting point
for the Bureau and support the Bureau’s proposal. As always, there are particular things that
can be improved and we support suggestions to strengthen the proposal, given the industry’s
track record of evading the law. In particular, the ability to repay protections must take
into account both a borrower’s income and expenses for all loans. As we move forward, we definitely want to
ensure that the expansiveness and strength of the proposal announced by the Bureau today
is not eroded. Thank you. Next we have Mike Calhoun, President for the
Center for Responsible Lending. Thank you. Today we applaud the CFPB for their
years of research and work, and for bringing this point today of having a proposal that
addresses the debt traps that ensnare far too many households and derail not only their
short-term but their long-term prospects. The data overwhelmingly support this. The
CFPB’s data found that over half of payday loans, in a 12-month period, went to borrowers
with more than 10 loans. CRL’s research finds that for 2-week loans, the average borrower
is caught in those loans for over half of the year, 7 months, and we have recent research
coming out that shows many of these borrowers incur overdraft fees connected to their payday
lending. We specifically applaud the foundation of
requiring ability to repay, which is commonplace is a deed, present in all regular-cost lending,
and making it the cornerstone of this proposal. We have deep concerns about some of the alternatives
that do not require ability to repay for the first loans. In one example, in the short-term
context, you could take three loans with a 2-month break and get three more loans without
checking ability to repay. The borrower would incur $500, $750 of additional fees, and be
in the hole, in essence, $1,250, and at that point we fear too much of the harm is done
and that prevention would have been better than cure, and that the options are very limited. Finally, it’s very appropriate that we’re
here at this hearing in Richmond, a state capital, because these rules will provide
layered protections for all states, but still individual states play an equally critical
role in protecting against abusive consumer lending. Usury limits remain an essential
part and often the most effective rule that protects consumers and realigns borrower creditor
interest. We look forward to working with the Bureau,
with the industry, and with all participants, to develop a final, strong rule. Thank you.
Next, Dana Wiggins, Director of Outreach and Financial Advocacy, Virginia Poverty Law Center. Thank you. As the Director of Outreach and
Financial Advocacy at the Virginia Poverty Law Center, and as someone who runs a hotline
for folks who have issues with a lot of kinds of loans, I have found that the Virginia story
is probably about as good as any other kind of story to kind of talk about how payday
lending, car title lending, open-ended line of credits, Internet loans, have all really
affected many thousands of people who take out the loans. When we started our hotline, I think it was
sort of arcing at the story that Commissioner Face and Attorney General Herring sort of
laid out for us, in that, in Virginia, we have always looked at the regulatory environment
and trying to keep access to credit open for folks. But in doing that, when payday lending
first got to Virginia, the original legislator who introduced the bill for payday lenders
and sort of ushered them in, in 2002, he immediately regretted that decision and publicly made
statements to that every year after. And I think part of that is that we do like to have
access to credit for people, and one thing I’ve learned from our hotline is that access
to credit is extremely important to people, but, at the same time, many of them really
just want money, and I think that’s one of the things we really have to remember is that
people want money, and people need money because they don’t make enough on their regular job,
and they’re always short every month, and almost rarely just a one-time expense—I
mean, maybe a third of the time, or less it’s like a one-time expense. The majority of the time that people talk
to us, it is a reoccurring, every month they’re short. They can’t make up hours at work, or
during the recession they were short, they got cut hours, or they lost their job, or
they got moved down to part-time, they lost their insurance. There are all kinds of things
that cause them to need extra money every month, but the problem is a payday loan or
a car title loan solution is something that may help them that first month, but the lesson
that I’ve learned is that it just makes their life horrible for the several months, years
afterwards, because they have to keep giving money away every month to the lender, and
then they never see any of that back. We had many consumers who borrowed and then
paid back thousands, sometimes tens of thousands of dollars in fees, over the lifetime that
they had their loans. And I think as we look at these proposals, I just hope that we keep
in mind that consumers want money. Consumers need money. But we need to make sure that
as they access the funds that they’re looking to have, that we make sure that they actually
have the ability to repay those loans. Many times they don’t actually have the capacity
to repay in the manner in which these loans are structured, so I’m looking forward to
the discussion. Thank you. Next we have Wade Henderson, President,
Leadership Conference on Civil and Human Rights. Thank you. Good afternoon. I am Wade Henderson,
President and CEO of the Leadership Conference on Civil and Human Rights, a coalition of
more than 200 national civil and human rights organizations dedicated to building an America
as good as its ideals. The Leadership Conference believes that the
ability to obtain and preserve economic security is an essential civil and human right of all
Americans, and that strong consumer protection laws are a vital component of securing that
right. Unfortunately, communities of colors and other economically vulnerable populations
have long been subjected to abusive financial service practices that have undermined their
security, with the most devastating consequences resulting from the abusive mortgage lending
practices that led to the 2008 financial crisis and the Great Recession. While we are encouraged by the improvements
to federal and state regulation in the wake of the financial crisis, communities of color
are still being heavily targeted by predatory lending practices. This has been especially
true in the market for small-dollar lending. Payday loans are marketed as an easy solution
to financial emergencies, but they too often fail to work as advertised. Indeed, the very
nature of the payday lending business model depends on repeated renewals of existing loans.
Now, what is even more troubling is the aggressive marketing of payday loans to communities of
color, and other economically vulnerable populations, including older Americans who rely on Social
Security for their source of income. What the CFPB is proposing today is an important
step in the right direction. It is a matter of common sense that lenders should ensure
that borrowers not simply have enough money to repay their loans, but to ensure that borrowers
can repay loans on time, without being left in an even worse financial position. Most
lenders already follow the ability to repay principle and we applaud the CFPB for applying
it to small-dollar lending practices, as well. At the same time, we are concerned about the
impact of any kind of safe harbor provision that could continue to expose some borrowers
to prolonged and expensive cycles of debt. So as the CFPB moves forward with this rule,
we urge you to make the most of your authority to protect all Americans, including communities
of color, from this scourge of predatory payday loans. Thank you very much.
I’d like to thank all of our panelists for their thoughtful remarks. Delicia, Kelly,
and I will now have a series of questions for our panel members, and I’m going to start
first with Dana Wiggins. Dana, what are some of the biggest challenges consumers face in
the payday lending market? After talking to many, many consumers over
the years—and we’ve been doing our hotline since late 2008—I think unaffordability
is one of the hugest obstacles for people. They’re in a financial bind and they know
that rent is due, they know that their car payment is due, they know that the mortgage
is due. They know that something is due—their utilities, and they’re afraid of getting the
lights shut off, or it’s an emergency that happens every month. But what I think they
know, and I think what they have expressed to me over the years is that as soon as they
get the loan, they need that money, and they feel relief the moment they have the money
from the lender, but the moment after that, when the loan is due, especially with the
balloon payment loans, in particular, but also unsustainable installment loans or line
of credit loans, is that the unaffordability becomes very apparent shortly on, and I think
that is, for many people, what really is the worst part of the loans for them, is the unaffordability. I think the other part is the stress, because
they’re relieved when they get the loan, but as soon as the repayment is due, it’s the
stress. The lenders will call them. If you have an in-store lender, they call you incessantly.
They may have one person out front—and this is not just me saying this. I go into lenders
all the time and check them out, and see how they treat customers. But this is also what
people who call us, talk to us about, is that they’re really nice when you walk in, they’re
so sweet when you get the loan, but immediately upon repayment time they start calling your
phone, they call your friends, they call your family. The stress of the repayment becomes
sort of worse than the original reason that they needed the loan, and I think for many
people that part is really hard. And then the last thing that I think is the
harassment during repayment, as well as the selling of their information. Several years
ago, when we had our changes to the Payday Loan Act, one company in particular sold their
list of borrowers who had been late at any one time. Even if those borrowers had repaid
the loan later, they sold their names to debt buyers. We received hundreds of calls, probably,
just on that selling of their information alone, because they were receiving calls,
even people who had eventually paid off the loan. So I think for many borrowers it’s the
unaffordability, the stress involved with repayment of balloon payments and unaffordable
installment payments, the harassment that they receive, to tell them that they have
to come pay the loan, or if they’re coming in late, lots of threats, threats to their
employers. With online loans, we get a lot of folks who get calls to their employers
and threats of criminal prosecution, which is something that’s actually illegal here
in Virginia. And then the selling of their information, which I think causes long-term
detriment to them. Thank you, Dana. Delicia?
This next question is for Stan Leicester. Your credit union offers small-dollar loans
to members. What features of those small-dollar products do you think set them apart from
other payday loans? First of all, I’d like to say that, listening
to Dana’s comments, I was our former collections manager at our credit union years ago, and
I can say, at a credit union, you certainly don’t have those types of practices in collecting
loans. But first of all, we do underwrite the loans.
We carefully underwrite those loans and make sure that the member has the ability to pay.
Our main goal is to get them out of that payday lending cycle and get them into more of a
traditional product. We also feel like many people end up improving their credit score
and ultimately getting them into that newer product, and obviously we can do it at a lower
cost. Basically, that’s why we think it’s a better alternative.
Thank you. The next question, I wanted to ask both Paulina Gonzalez and Lisa McGreevy.
Paulina, we’ll start with you. What role might a lender’s determination of a borrower’s ability
to repay play in the payday loan market? We believe that determining ability to repay
is the foundation of good underwriting. It will reduce lenders’ risk and maximize borrowers’
repayment rates, while fulfilling the purpose of good lending, which is to finance shop
of an immediate expense over a period of time through payments that are within the borrowers’
means, within their budget of expected income, expenses, and cash flow. So good underwriting
can help borrowers and lenders determine whether, in fact, the borrower should first adjust
income, expenses, or cash flow in order to afford the loan on its terms. So in states where payday lending is not allowed,
studies have shown that consumers do, in fact, adjust by lowering expenses or borrowing from
friends or family, on terms that better fit their budget, much like my parents did prior
to the existence of payday lending. I’m the daughter of immigrants from Mexico. We struggled
to keep a roof over our head, food on our table, and the lights on, and we had to suffer
the humiliation and uncertainty of being rejected for traditional sources of credit on more
than one occasion. Like Dana talked about, for many in our communities
it wasn’t a need for credit but a need for income to make ends meet, that we badly needed
in order to keep the roof over our head. In those days, we didn’t have payday lending
in order to meet the gap between income and expenses. We had to tighten our belts. We
had to borrow from Peter to pay Paul. We had to borrow from family and friends. We had
to recycle cans. We did whatever it took. But what I’m glad we didn’t do is end up in
a debt trap that left us worse off than when we started, with our credit in shambles, deeper
in debt, and at the end of the day with a bigger gap between income and expenses. A February 2013 Pew Research study found that
borrowers often turn to cash infusions in order to pay off a payday loan debt. What
means is that many payday borrowers ultimately turn to the same options they could have used
instead of payday loans to finally pay off the loan that they took out, including getting
help from family and friends, and many of the options I talked about earlier. So, to reiterate, the purpose of credit is
to minimize the shock of an expense to a person’s wallet. We agree that everyone needs options
to help achieve that, but payday loans don’t do that. At best, they push the entire shock
forward a short while. At worst, they intensify the shock until it’s not survivable. Thank
you. Thank you. Lisa, we’d love to get your thoughts,
as well, about the role that a lender’s determination of a borrower’s ability to repay might have
in the payday market. Thank you so much. You know, I think everyone
here can agree that what we want is for the borrower to be able to succeed in repaying
the loan. We all lose—everybody loses—if the borrower defaults. A belief that a loan
will be repaid is a basic tenet of lending. Over the past 10 years, OLA members have invested
significant resources in developing technology, analytics, and procedures that use data to
underwrite loans. We consider income, debt payments, and recent consumer financial behavior.
Our members have developed innovations that deliver the convenience and privacy that borrowers
want. I am a little concerned that the prescriptive
nature of some proposals that rely on old-fashioned and outdated methods like faxing documents
will make it harder on the very people that we are all trying to help. Who uses a fax
machine these days? I think the data revolution has brought about the democratization of credit.
We are now able to know more about borrowers than ever before, and that has allowed us
to make more informed decisions about who we should loan to. In fact, there are more
people today getting credit than ever before, because of these innovations. Just this week,
the Urban Institute reported that there was a significant increase in middle- and upper-income
people using these kinds of non-bank credit products. Good borrower assessments using
statistical calculations and the growing data that is available about individual consumers,
as well as reporting of loans to consumer specialty bureaus, help borrowers to manage
the debt obligations that they will incur, and I think will eliminate the need for government
to dictate when consumers will be allowed to take out loans. Thank you.
Thank you. This next question goes to Ed D’Alessio and Mike Calhoun. We’ll start with Ed. Ed,
what are your thoughts on the rollover feature of payday loans and their effect on a consumer’s
ability to repay the loan? Thank you, Delicia. First I think we have
to define what we’re talking about. We define rollovers as the extension of an outstanding
advance by payment of only a fee. I believe others, including the CFPB, may define rollover
differently. As a matter of law, of the 33 states that permit some form of payday loans,
20 prohibit rollovers altogether, 4 limit rollovers to 1, and no state that permits
payday loans has failed to enact a limit on rollovers. FSCA’s best practices also prohibit
rollovers, except where expressly permitted by state law. So what I think we’re really talking about
here is not so much rollovers but renewals, but whether we’re talking about rollovers
or renewals, I think we need to look at the issue from the right perspective, and that’s
the consumer perspective. As I said before, our consumers are intelligent, and they’re
responsible, and they make rational decisions, but they also have issues, and we can’t dictate
how often they’re going to have those issues. I think Dana actually said it best. So we think that the issue needs to be looked
at more from the demand side than the supply side. The demand side is determined by consumer
need. How many times per year does a consumer need credit? How many times per year does
a consumer’s expenses, anticipated or unanticipated, exceed her income? How many times per year
does a consumer confront an emergency? And I believe if we look at it from that angle,
we’ll realize that that’s the way we have to approach this issue. In most situations
of rollover or renewals is the cheapest alternative and the best outcome for a borrowers. Many would have you believe that renewals
cause a cycle of debt, when in fact they’re just helping consumers manage their finances,
and we believe two recent studies conclude this. First is a study by Jennifer Priestley
from Kennesaw State College, and the second is a study by Clarity Services, which concluded
that reborrowing is a decision made by the consumer, and is simply a matter of choice,
rather than one of ability or inability to pay. So, again, we think that this issue needs
to be looked at from the consumer standpoint, in order to meet the consumer’s need, and
it can’t be dictated by some external determination, which is not based upon that factor. Thank
you. Thank you, Ed. Mike, your thoughts on the
rollover feature of payday loans and their effect on a consumer’s ability to repay the
loan? Yes. Thank you. I think, first, many in industry
equate the fact that a loan was repaid with the borrower having ability to repay the loan
without reborrowing, which, when you look at the facts, they just don’t support that.
The industry requires, as a condition of these loans, that they have the right to reach into
the borrower’s account first, on the day of the paycheck coming in, and take the payment
out, and they say, “Our reaching in and grabbing that money first shows that you could afford
that loan without reborrowing.” And then you look at the data. Our research has shown 94
percent of payday loans go to borrowers who had a payday loan within the same month—within
the same month. As mentioned by Director Cordray, there are
other evidences that these loans do not reduce financial distress. One of those is overdraft
fees, that when the lender reaches in first and takes out that payment, oftentimes that
creates overdraft fees, and we have just completed research showing that of payday borrowers,
one-third of them had overdraft fees on the same day that their payday loan was extracted
from their account. Over half of them had overdraft fees within 2 weeks of the time
of their payday loan payment. And then you see it, over time, borrowers
get deeper in debt with payday loans, and take out more loans, and get stuck into borrowing
from one payday lender to pay another. And then, I think perhaps remarkably, this same
study we’re releasing shows that half of payday borrowers, during their course, experience
defaults, meaning that they ended up with money in their account, even at that first
chance for the payday lender to reach in, and many of these folks end up losing their
bank accounts and being driven out of mainstream banking as a result of the payday lending. And, finally, these loans just come to dominate
people’s lives, when you talk with payday borrowers. This is what their lives are surrounded
by, and it also causes long-term financial marginalization of these people. Thank you. Okay. I have the last question for our panel.
It is a question for Lynn, and it’s a question for Wade, as well. Lynn, we’ll start with
you first, and the question is, what is the right balance between access to credit and
consumer protection in the payday lending space. Lynn? Thank you, Steve. To quote things we hear
from the Bureau, we know it when we see it, and what do we see? We see that if the customer
is happy, if they get the credit they need and they have the protections they deserve,
then we’ve reached the right balance. In our company, we’ve offered, starting with the
payday service and ultimately with other loan services, to our consumers for 20 years, and
we feel like that we have the right balance between access to credit consumer protection. As an early adopter of CFSA, we were instrumental
in providing best practices to our consumers, which go beyond those things that are written
into most of the state laws. And we do believe that consumers deserve to have full disclosure.
They deserve to have a complete understanding of everything that they do and all the money
that they borrow. I think you have to step back and look at
the broader issues here. We’re neighborhood stores. We’re consumer community financial
centers, and our reputation and our business success is based on our consumers having a
positive experience with our products. A successful business is one that takes care of its customers,
and looks after their welfare. Our products are simple. The disclosure is clear and transparent.
Our consumers understand what they’re borrowing and when it’s due. Frequently we are their
only alternative, and we’re their lifeline, and the place that they turn when other options
are few and far between. To ensure the proper balance between access
and protection, we do have to have clear and consistent guidelines, and we support that.
We have to have clear and consistent disclosures, for both banks and non-banks, so that everyone
can make the best decisions for themselves. And, you know, as another quote from CFPB,
“Know before you owe.” I want you to understand, and I think Ed said this earlier, our consumers
manage their budgets much more carefully than anyone sitting up here on this panel does.
They know exactly how much money they have. They know exactly how they have to spend it.
And, by the way, the most expensive money is the money you can’t borrow, because you
mentioned, Dana, why do they borrow money from us? Because their lights are going to
be turned off, their rent won’t be paid. And if they make exactly the same amount of money
as their expenses, and they get paid like I do, ever 2 weeks, that paycheck never hits
when the rent payment is due, and these loans permit them to make those payments on the
due date. Thank you, Lynn. Wade, the same question for
you. Could you speak to the balance between access to credit and consumer protection in
payday lending? It’s a good question. Look, small-dollar loans
are an important element of the financial service marketplace. However, extending small-dollar
loans to those who cannot reasonably afford to repay is like giving a starving man food
laced with poison. At the end of the day he may feel great, initially, but obviously the
practice is deadly at the end of the day. Now, we are beyond the time when the standard
“let the buyer beware” ruled commercial activity in the United States. Obviously, individuals
have a responsibility to know their financial circumstances and to address those circumstances
in legitimate ways. However, states have barred, for examples, usurious interest rates, because
they are not considered in the best interests of the country, as a whole. We have also seen
other practices put in place that have attempted to provide layers of protection against abusive
practices that prey on the desperation of individuals who deserve legitimate responses
to their problem but not in the exploitive manner that they are being used today.
And to be frank, I think most of the American people agree with that observation. So the
ability-to-repay standard that the CFPB is attempting to apply to payday lending, which
is used in many other—in fact, most other—forms of lending, is an objective standard that
takes into account the individual circumstances of the consumer, and does not make a one-solution-fits-all
to address those problems. So I think when we talk about the interest
of consumers, we have to take the totality of those interests into account. And, as a
matter of public policy, it should be prohibited to exploit individuals beyond the recognition
of fair practices, and that is unfortunately the system we have today. This concludes the panel portion of our program.
Please join me in thanking all of our participants for a thoughtful conversation.
At this time I’ll ask the panelists to rejoin the audience, and I’m going to turn the program
back over to our Associate Director for External Affairs, Zixta Martinez. Zixta?
Please, let’s give a round of applause to our really exceptional panelists today.
An important part of how the Bureau helps consumer finance markets work across the U.S.
is to hear directly from consumers, from industry, from our state and local partners, and from
community advocates. One of the ways that the Bureau gathers feedback is through public
events such as these. We have held numerous field hearings, public town halls, and other
public events in places such as Indianapolis; Minneapolis; Birmingham, Alabama; Sioux Falls,
South Dakota; Durham, North Carolina; Detroit; St. Louis; Atlanta; Des Moines, Iowa; Miami;
Los Angeles; Itta Bena, Mississippi; Phoenix; Nashville; New Orleans; Oklahoma City; Reno,
Nevada; El Paso, Texas; Newark, New Jersey; and, of course, now Richmond, Virginia, among
others. At these events, we not only hear from experts
in the field, we also invite the public to participate and share their comments as well.
Before I open the floor for comments, I want to remind folks that there are several other
ways to communicate your observations, concerns, or complaints to the CFPB. You can file a
consumer complaint with the CFPB through our website at Our website
will walk you through the process for filing a consumer complaint about a financial product
or service. The CFPB takes complaints about mortgages, car loans or leases, payday loans,
student loans, or other consumer loans. We take complaints about credit cards, prepaid
cards, credit reporting, debt collection, money transfers, bank accounts and services,
and other financial services. If you don’t have a specific complaint but
would like to share your story with us, we have a feature on our website called Tell
Us Your Story, where you can tell us your story, good or bad, about your experience
with consumer financial products. Your story will help inform the work that we do to protect
consumers and to create a fairer marketplace. We also have another feature called Ask CFPB,
where you can find answers to over 1,000 frequently asked questions about consumer financial issues,
as well as additional resources. So I encourage you to visit to learn
more about the resources and tools the Bureau has developed to help consumers make the best
decisions for themselves and for their family. Now it’s time to hear from you. A number of
you—in fact, it’s the largest number of commenters we’ve had since we’ve been doing
this, well over 70—have signed up to share comments and observations about today’s discussion.
The public comment portion of the field hearing is also an important opportunity for the CFPB
to hear about what’s happening in consumer finance markets in your community. Each person
who signed up to provide will have 1 minute to do so, and what we hear from is invaluable,
and we want to hear from as many of you as possible, so I encourage you to please observe
the 1-minute limit so that everyone who signed up has the opportunity to share their observations
with us today. So, with that, I will call our first member
of the public. Ed Mierzwinski. Ed, someone will bring you a microphone.
Thank you, Zixta, and the CFPB. I’m Ed Mierzwinski and I’m with the U.S. Public Interest Research
Group and also Americans for Financial Reform. I’ve been investigating the payday lending
industry for over 20 years, and many states have done yeoman work trying to stop this
industry and other high-cost lenders. It’s like a game of Whack-A-Mole. That’s why it’s
critical that the CFPB has put out a comprehensive platform. We urge you to make it as tight
as possible. Close all the loopholes and end this nightmare for consumers. And I also want
to point out the idea of the CFPB needs no defense, only more defenders, so I encourage
people to look at the CFPB website and find out all the good things it can do for you. Thank you, Mr. Mierzwinski.
Marsha Gregory? Hi. My name is Marsha Gregory. I am an employee
of Advance America. I’m proud to say I’ve been there for 13 years. And what I am hearing
our customers is that they come to us because they do need money for emergencies, car repairs,
sickness, due to maybe not being able to work. Also, they have car service problems, car
breakdown, anytime, on their way to work, so they need to come to us to get money. For
every income bracket, we have a customer—high income, low income. Also, we have access to the credit. Customers
say they want to access to credit when a need arises. They are also hard-workers and they
deserve to make their own choices on where they go to get money for their needs. Thank you, Ms. Gregory. Duane Alexander? Virginia Murray?
Hello. My name is Virginia Murray, and I have worked in this industry for about 11 years,
and during my time here I’ve helped thousands of customers with their short-term financial
needs. I have countless stories of people that need and appreciate our services. Our
customers choose—and the key word is “choose”—us for a variety of different reasons. We serve
customers from all walks of life, from single mothers to small business owners, and we help
all of them. I would like you all to consider the importance of our services in the industry
it offers, and what would happen to these people if we didn’t have access to credit
that we offer. Sometimes regulation has unintended consequences, and I’d like to thank you for
your time. Thank you, Ms. Murray. Lauren Saunders? Thank you. Lauren Saunders. I’m with the
National Consumer Law Center. Payday loans claim to help the consumers who are desperate
for money, to make ends meet, but at the end of the day they take money that people desperately
need to meet their families’ needs and put them into a cycle of debt. The CFPB’s proposal
is a common-sense one. All responsible lenders must evaluate borrowers and design their loans
so that they are affordable, that people can afford to repay them while meeting their other
expenses, and not getting into a cycle of debt. I think a proposal such as that will
result in better choices for consumers. And I also applaud the Bureau for taking a broad
approach and not limiting it to traditional 2-week payday loans. But despite the strong fundamentals of the
rule, I’m concerned about the either-or, prevent-or-protect approach. We need both to protect borrowers,
and we can’t have a business model that relies on back-to-back loans, fails to ensure that
borrowers have money for expenses, or permits high default rates, bounced checks, and other
indicators that people are having trouble and cannot afford their loans. I appreciate
you taking attention to that. Thank you. Thank you, Ms. Saunders. Anna Varney? Hi. I’m Anna Varney. I work for Approved Cash
Advance in Martinsville, Virginia, and I now have 255 open payday loans to date, 100 at
my store, 100 of them are in fixed income. These clients need medicine. They need doctor
care visits. Others have been turned down from other lending companies due to credit
ratings. Other lending companies require credit checks or board meetings to grant them a small
loan, which can start at $1,000 up to $3,500. This can make for a much longer loan length
than my client would like, and borrowing from friends and family may not be an option. We
are their last resort. Payday lending offers consumers a quick and
easy solution to what seems to be the end of the world for them on that day. They get
their money, they have resolve, they can go on for the day. Yeah, we lend amounts based
on percentages of their income, but we do sit down with them. We talk with them. We
say, “What is your urgency today? What do you need?” We go over so many things with
them. We get to know our clients. We don’t just give them whatever they want and feel
that they can’t afford it. We want them to be able to come back. We want them to go ahead
and refer people, and send people in instead of coming in repetitively, like you mentioned.
So I’m proud to work with them. Thank you. Thank you, Ms. Varney. Marco Grimaldo?
Thank you. I’m Marco Grimaldo with the Virginia Interfaith Center for Public Policy. Time
and again, many of our most sacred scriptures caution against usury. If one of your countrymen
becomes poor and is unable to support himself among you, help him as you would an alien
or a temporary resident, so that he can continue to live among you. Do not take interest of
any kind from him, but fear your god so that your countrymen may continue to live among
you. You must not lend him money at interest or sell him food at a profit. This chapter
from Leviticus reminds us that we have a responsibility to be in right relationship with our community,
and a responsibility to care for the most vulnerable among us. I’m here representing the Virginia Interfaith
Center for Public Policy, the oldest faith-based advocacy organization in Virginia, and across
our many faith traditions, our members, our churches, and communities, there is clear
agreement that payday, car title, and Internet loans are bad for Virginia. Locally, faith
groups are often called upon to help families that can no longer make ends meet and need
help to get out from under crippling debt. Payday loans that start out with a small initial
loan can cost thousands more, and interest quickly mounts to 300 percent or more.
Thank you, Mr. Grimaldo. Tammy Adams?
Hello. My name is Tammy Adams, and I work for Check City, and here at Check City we
do give out payday loans, and when customers come in, they come in with a crisis, and we
tell them that they’re welcome. We go over all the rules and regulations with them, and
we do tell them that it is a short-term loan, and we give them 45-plus days to pay it back,
and I have a couple of testimonies in here. One of my customers, he came in, and his car
broke down. He did, indeed, go to his bank and his bank ran a credit check on him and
he did not pass the credit check. So, you know, I’m like, “Well, you came to the right
place,” and indeed we did offer a short loan, $300. Interest rate, $57, 45-plus days to
pay back. He was happy. He thanked me. He was like, “I’m so thankful that you guys are
here.” Another testimony. A young lady came in and
she needed money— Thank you, Ms. Adams. We’d be happy to take
that in writing. Oh, wonderful. Thank you. Thank you. Stephen Reeves?
My name is Stephen Reeves and I serve as the Coordinator of Partnerships in Advocacy for
the Cooperative Baptist Fellowship, a network of 1,800 churches, including 350 here in Virginia.
Our churches and pastors have seen first-hand the consequences of payday and auto title
lending in their congregations and communities. They have used their benevolence funds to
aid neighbors trapped in the cycle of debt, proving to be so central to this business
model. They have offered financial education classes, and some have worked to develop alternative
loan models. They have also been outspoken advocates for
reform in states across the country, including Kentucky, Louisiana, Alabama, Missouri, and
Texas. I know our folks will be encouraged with the outline of possible regulations released
here today. I hope giving lenders a choice as to which rules to follow does not prove
problematic, given their notorious ability to creatively avoid regulation and exploit
loopholes. I am convinced these proposals represent a significant step forward for borrowers.
If proposed rules are strictly enforced and operate as intended, it will certainly represent
a major improvement over current practices in so many states. Thank you, Mr. Reeves. Elisha Burke?
Elisha Burke. I’m a representative of the Baptist General Convention of Virginia. Our
900 churches are all supporting the CFPB’s effort to limit what these companies can do,
having so many churches that are acutely aware of the other side that maybe you don’t see.
You don’t see the increase in having to collect food and to feed people who are not homeless
but working and had to pay that loan. You don’t see those who have lost a car, now they’ve
lost a job, they come to the church because they desperately need help. So you see some
people paying but you don’t know what it took to get there. So where it is currently, there’s a great
burden on the entire community, and whereas we are there to serve, we know that it doesn’t
have to be that way, so you need to be more cognizant of the true damage that is done.
Having a need does not necessitate giving the person a leaky lifeboat. Thank you, Mr. Burke. John Martinez? My name is John Martinez. I represent AmeriCash
Loans. We are concerned that the regulatory body does not adequately understand the small
consumer lending market, and the effect that this proposed rulemaking will have could result
in the loss of jobs as legitimate businesses are forced to close their doors, and consumers
are forced to look at unlicensed lenders. We operate in Illinois, where we have a state
database. That state database limits customers to two loans. It also establishes income verification
that requires the lender to establish the customer’s ability to repay. In Illinois,
the attorney general, along with the regulatory bodies, the lenders, and the consumers, work
together to provide credit. We want to continue to support regulation. We want to continue
to support the state databases. And, most importantly, we want to continue to support
our customers when they need credit. Thank you, Mr. Martinez. Thomasine Wilson? I’m Thomasine Wilson. I’m on the State Governing
Board of Virginia Organizing, and we are an organization that we’ve been working with
the legislature for the past 9 years to try to pass laws that would stop people from being
able to get these type of loans, with these astronomical charges. And as a consumer, I
had one of these loans, when it initially got into Virginia, and it started at about
$200. But over a period of times the fees started to add up, because it was an emergency
and I thought it was going to be a couple of weeks when I would pay it back, but it
ended up being almost 2 years, with bank fees, because my bank wouldn’t give me a loan, and
I’ve had a bank account for 20 years, but I couldn’t get anything from that bank. And I think it’s just outrageous that I had
to pay such a high cost of the percentage rate on that loan, and it should not have
been $500-some for $200. But, like I said, it’s the bank fees, it’s the percentage of
increase on the account. But I ended up paying $579, but most people that I know, it costs
them thousands of dollars. Mine was just $579, in those 2 years, but that was too long for
such a short-term loan, and I suggest that anyone that doesn’t have one, don’t get one.
But if the institutions that we have our finances in would give us a loan, we don’t have to
go to these types of facilities to get a loan. Thank you, Ms. Wilson. Michelle Hash? Thank you. Michelle Hash, Advance America.
First I want to say, in my early 20s, as a single parent, there were times when my finances
fell short of meeting the needs for my family, and fortunately for me I do have a great support
system and a family that I could’ve called, but I chose not to. I’m independent, I have
too much pride, and I wanted to take care of my business myself, so I was very fortunate
that I had access to payday lending to cover those expenses at that time. I just want to say, as an employee of 10-plus
years in this industry that I’m proud of what I do and the service that we provide. We do
our very best to ensure that our customers understand the terms of the loan, and the
expectations, and have the ability to pay back. These customers come to us because they
don’t want to ask somebody else for help. They’re our neighbors, our children’s teachers,
our fellow church members. These people, in this room, with these big yellow stickers
on, are here not only to support their families and their jobs, but they’re also too very
proud of what they do and the service that they provide. They’re talking to these customers
every day. Thank you, Ms. Hash. John Copenhaver? Yes. John Copenhaver, United Methodist Clergy,
former President of the Valley Interfaith Council in Winchester, Virginia. Within a
mile of my home in Winchester, Virginia, there are eight predatory lenders, and that’s not
counting the many others in our community. Why so many, you might ask. Winchester is
the northernmost city in Virginia. Desperate and poorly informed people come to Winchester
from eastern West Virginia and from western Maryland. They’re attracted from states with
laws protecting them from predatory financial practice. By the lure, by the honey of quick
cash, they are trapped like flies on flypaper. Four out of our neighboring states do not
allow car title loans—North Carolina, West Virginia, Kentucky, and Maryland. It’s past
time for Virginia to protect our most vulnerable citizens. I drove here 3 hours at my own expense and
time to testify on behalf of the poor and the vulnerable. I know there are many others
who have done the same. I wonder how many people speaking and clapping for these loans
are employed by the lending institutions? Thank you, Mr. Copenhaver. Katherine Lucas
McKay? KATHERINE LUCAS McKAY: The last time that
I was in a payday storefront, a friendly employee was proactively calling a borrower to say,
“You know, in just 2 days you’re eligible for a rollover, so you might want to come
in.” While that is great customer service in one way, the debt trap is real, and for
financially vulnerable Americans to have a shot at stability, we have to end it. My organization,
the Corporation for Enterprise Development, commends the Bureau on many of the strong
elements of the framework that it has released, especially provisions related to check-holding,
mandatory ACH, and limiting withdrawal attempts. We urge the Bureau, however, to strengthen
the ability-to-repay provisions in the proposed rule, when it is available, and also encourage
the Bureau to address the online lenders and how those lenders follow state laws. Thank
you. Thank you, Ms. McKay. Senta Sledge?
Good afternoon. How y’all doing? In every industry, there are gray areas or topics that
are constantly the seed of heated debates, no matter what area of business that you look
at. Short-term loans can actually be very helpful in a tremendous and financial time
of need. I’ve been employed with our company for 13 years, Check City. It is my passion
to assist our customers in whatever the financial situation is that they may be facing at that
time. We have nothing but great feedback from our customers about how happy they were that
they could come and take out a small loan that a bank would not assist them with.
Thank you, Ms. Sledge. Quita Johnson? Good afternoon. My name is Quita Johnson,
and I started off with a $300 loan from LoanMax Title Loan, and, unfortunately, I wasn’t able
to pay it back in the time frame that I initially thought I would, and over a period of time
they took the vehicle, and from a $300 loan I just received a letter from them a couple
of months ago, saying that I have an outstanding balance with them for 5,600-some-odd dollars,
from a $300 loan. And I also received phone calls from somebody who posed as a lawyer,
or whoever he was, stating that criminal charges would be put against me for fraud. I mean,
I just don’t know what to do at this point, so I wouldn’t urge anybody to go to any of
these title loan places or any other loans, to go get a loan out of desperation, because
for me desperation turned into a debt. Thank you.
Thank you, Ms. Johnson. Anita Cromwell? Good afternoon. My name is Anita Cromwell,
and I’m a branch manager at The Loan Store in Virginia Beach, Virginia. I’d like to chime
in on a personal level and I’d like to talk about pride, okay? I’d like to talk about
how my employees and I have pride in helping customers who otherwise may be facing more
dire circumstances. That pride is generated by the positive feedback we get from our grateful
customers who appreciate having solutions to help them save money, make ends meet, and
accomplish their financial goals. I know because I used to be a customer. A short-term loan
helped me when I once fell into a sudden financial situation. Many of my customers are average
people, just like myself, okay? And I have a story about a gentleman who came into my
office, who recently had lost some hours at work, due to our recent snowstorms in the
area. We made him feel comfortable. When he came back to repay his loan, he expressed
to us the gratitude that he felt, knowing that we made the process easy for him, and
he said that he was happy that he a place to come to.
Thank you, Ms. Cromwell. Carlene McNulty?
Thank you. My name is Carlene McNulty. I’m an attorney with the North Carolina Justice
Center, a nonprofit in Raleigh. I’ve been a consumer attorney for over 30 years and
have represented countless consumers trapped in payday lending loans. Thankfully, I practice
in a state where our leaders recognize payday’s harmful effects and have banned the practice
outright. Payday lending has been illegal in North Carolina for over a decade, and we’d
like to keep it that way. We have no need for triple-digit interest rates in North Carolina.
We don’t want or need any loans made to consumers who can’t afford to repay them, and we’re
worried that your proposal, in its current form, is going to be used as a seal of approval
for payday lenders, whose lobbyists are lining the halls of the General Assembly, probably
as we speak. We urge you not to sanction, either explicitly or implicitly, any high-cost,
unaffordable loan product. Thank you. Thank you, Ms. McNulty. John Weston?
Thank you. My name is John Weston. I’m with Integrity Funding. We’re a small consumer
lender. We’ve got about 73 employees, and we are able to provide small loans to customers
when they have these short-term needs. It’s something that several people mentioned, hey,
somebody tried to go to the bank and they couldn’t go to the bank and get it. We were
able to help them. Our goal is to help the consumer, not to trap him in some kind of
cycle of debt. We’ve got 73 employees. We’ve got another 700 storefronts that we work with,
making our loans. We’ve got all these people that actually rely on us for their livelihood,
in addition to the consumer that needs the funds. We urge the Bureau not to do anything
that will restrict that credit, because otherwise you’re going to hurt the financial livelihood
of a lot of people. Thank you, Mr. Weston. Michael Delossantos?
Stefan Kundrat? Hi. My name is Stefan Kundrat. I’m district
manager for the Richmond market for F&L Marketing. Our company operates 19 locations in Virginia,
and we’ve been in business for over 15 years. We started offering payday loans when they
were regulated here in 2002, and right now we currently provide payday and installment
loans. The 2008 regulation was extremely rough on our company. As a direct effect of this
regulation, F&L Marketing lost over $1 million in revenue the first year. We had to close
20 percent of our stores, which resulted in the loss of many jobs. Many of these that
were lost were working mothers trying to support their children. Our associates who were lucky,
or fortunate enough to not lose their jobs, we weren’t able to offer a raise for them
for over 2 years, due to this massive loss of revenue. To this day, I firmly believe that the Virginia
lawmakers didn’t have any idea what this destruction of the 2000 regulation had on their constituents,
or to our state’s small businesses. Furthermore, I don’t think the Virginia lawmakers understand
our business and the services we provide to our customers.
Thank you, Mr. Kundrat. Barbara Williams?
Hello. My name is Barbara Williams. I am an employee of a company that provides payday
and title loans, and I know we are a breath of fresh air to the customers that come to
us in desperation. I see the tears and I see the sadness. I see the misery on their faces
when they come in, explaining their stories of eviction, sickness, death, inability to
pay mortgages and rent, and say, “I’ve been to everyone, trying to get assistance, and
I can get no help.” And I’m happy to know that we are there to help them in their need
of desperation at that time. Here are a few letters that they wrote, for
the ones who were not able to come in. They dropped them off, saying, “We weren’t able
to make it there because we had to work.” But there were situations where one lady had
to retire to take care of her sick husband, who eventually passed. Now she had to come
back to us, years later, to get money to bury him. These are people that really need help.
I had another lady that wrote a letter, saying that she needed to purchase heating oil for
her home for the winter. And one single working lady said that she had a persisting medical
condition where she needed to constantly buy medication that her insurance company would
not even approve. Ms. Williams, we’d be happy to take your letters.
Thank you. Jay Brown ? Michael Bacon?
Yolanda Walker? Hi. My name is Yolanda Walker. I’m with Advance
America. I’ve been employed there for 9 years. I’m going to tell you a story. A lady came
into my store with three children, ranging from 5 to 14. She told me she had lost her
husband and just lost her son, and was now taking care of her kids. We did a loan for
her, because she was turned around from everywhere else. Now, I’m going to tell you, that story
was 3 years ago. She hasn’t been in our store since to do a payday loan, but she was there
to send money to her daughter that’s now in college. And what stood out to me is she said,
“I’m glad you was there when I needed you.” I was also a customer at Advance America before
I worked there, and I haven’t been to a payday loan company since then, but if I need them,
I’m glad to know that they are there. Thank you, Ms. Walker. Curtis Johnson? Scottie Holley?
Hi. Good afternoon. I’m Scottie Holley. I am also an employee of Advance America. Very
quickly, during my tenure at Advance America, I’ve had the opportunity—my managers often
tell me stories about the customers that come in, and I bear witness to a lot of good that
our company does for our community. My set of managers, like Yolanda, regularly, again,
tell me stories about how we’re able to meet the needs of our customers. We are a staple
in the community, and we’re a bridge to security and financial peace of mind.
Thank you, Mr. Holley. Alexis Goldstein? Hi. I’m Alexis Goldstein with The Other 98%,
and I want to read you a quote from former Idaho Representative Walt Minnick, that he
gave to the radio show, “This American Life.” “I had some meetings I was pretty uncomfortable
at, with a payday loan kind of lender. Some folks in that industry were a little unsavory.”
Walt Minnick now lobbies for Lisa McGreevy’s organization, the Online Lenders Alliance.
The payday lending industry is an industry that knows how to lobby, and they know how
to buy off even people who are previously critical of them. I urge the Bureau to write
strong rules, because I know you are up against lots and lots of money. The Online Lenders
Alliance paid Minnick’s firm, The Majority Group, $200,000 in 2014, to reverse his position
where he was previously critical of the industry. One other point I want to make, the industry
says we don’t need new regulations, that they’re treating their customers well, but we’ve heard
this story before. When the financial industry lobbied against the CARD Act, they said they
didn’t need it, that it was going to lead to lost profits for their industry, but it
turns out that this regulation actually helped the industry because the common-sense reforms
reduced delinquency and actually made their industry more profitable.
Thank you, Ms. Goldstein. Lana Garner?
Hi. Lana Garner, District Manager for Allied Cash Advance. I can say I’m very proud to
work at this company because I see what we do. Every single day, we change lives. Prior
to working for Allied, I worked at a major bank where I customers come in, day in and
day out, crying because we charged them $170 for a cup of coffee. Where do those customers
go? They come see me now. Every day we change lives. I couldn’t say
that before. I was putting people in financial hardships, where now I take them out of those
financial hardships. So I hope that you guys take what you hear today and realize that
we’re not here to put people in situations. We’re here to help people out of those situations.
So thank you. Thank you, Ms. Garner. Reverend Sakina Hamlin?
Thank you very much. I am very grateful to represent 12 national denominations and 8
state ecumenical councils, as we stand to eradicate poverty and to promote economic
justice and economic—what we have seen in the organization I lead, the Ecumenical Poverty
Initiative, is that we have seen, in multiple states, the payday lending industry actually
target and aggressively market to communities of color, particularly in denominations of
color, so that they will have their products there, as opposed to white counterparts. What
our pastors have told me is that they are those that had to hold the hands of people
when they themselves can’t provide food for their children because they’re in a cycle
of debt. This we know, and we testified to as Christians. We also do work as it relates to child hunger,
and we would never go to any member of Congress, saying to them if a child is food insecure,
please give them poisonous food. And so we ask even right now that CFPB would not continue
this practice of giving poisonous food to the children and families that make up our
faith communities. Thank you. Thank you, Ms. Reverend Hamlin. Alicia Brown?
Hi. I’m the compliance officer for a payday, title loan, installment loan lender. We are
in multiple states, so obviously I have a pretty strict compliance program in place,
and with that I have to work with my state regulators. And I’ve heard it mentioned here,
a couple of times, about how they’re going to oversee us, and what’s it’s going to cost
to the different states. If the rules that you wrote and put out this morning are enacted,
it’s going to cause mass chaos. But working with my state regulators, they understand
what our product is, what we need per state, what we can do in each state. I really don’t
understand what it is that you feel, the CFPB feels the state is not doing to protect the
consumers and to oversee us, where you feel that you need to rewrite the practices that
they have in place. It doesn’t make sense to me. And then, if you feel that access to credit
needs to be restricted, why is it that you do not use the funds that the CFPB has to
go after those lenders that are not legal, are not regulated, because I feel that my
state regulators are on top of me. Thank you, Ms. Brown. Kathy Nelson?
Thank you very much. My name is Kathy Nelson. I’m the Director of Navy and Marine Corps
Relief Society in Norfolk, Virginia. We’re a nonprofit that provides interest-free loans
and grants to active and retired service members and their families, and despite the protections
of the Military Lending Act, we continue to see the impacts of many of the high-interest
products that have been referenced here today. Terms and conditions of these products are
not always sufficiently obvious until after the commitment has been made, and repayment
of these products are often prioritized ahead of other obligations, causing additional fees
and expenses, and the inability to pay those critical expenses, including basic living
expenses. Any formula must include the ability to repay, and we appreciate the opportunity
to be here today. Thank you. Thank you, Ms. Nelson. Tom Domonoske?
Hello. My name is Tom Domonoske. As a legal aid lawyer in Prince Edward County, I started
helping victims of predatory lending in Virginia in 1993. When Virginia started to regulate
these dangerous products, the industry response was mandatory binding arbitration clauses.
Now, instead of these dirty practices exposed to the sanitizing light of our justice system,
unlawful practices go unchecked by being shunted into a private dispute resolution system,
with an inherent bias in favor of repeat players. As an example, several years ago, Juridical
Solutions, which is a Virginia arbitration provider full of retired Virginia state judges,
ruled against a title lender in one of my arbitrations. Since then, none of the industry
has ever allowed them to act as an arbitrator in any of our cases. Additionally, most of
my clients got into these bad products because of abusive debt collection practices or unlawful
landlord threats of lockouts or utility cutoffs. They didn’t know they had better options than
getting trapped in the cycle of debt. Finally, we need a common definition of a
failed payday loan. The industry says it provides short-term loans. It should be measured that
way. Thank you, Mr. Domonoske. Todd Davidson? Todd
Davidson? Brian Wise? First of all, Director Cordray, congratulations
on your work over the last couple of years, creating one of the most influential and powerful
agencies that this country has ever seen, so kudos to you for that. Many of us consumer advocates—I work for
the U.S. Consumer Coalition—many of us consumer advocates were hopeful that the agency would
do what it said it was going to do and go after consumer fraud. Unfortunately, this
rule proves that the agency is more interested in going after the consumers that use these
products and protecting them from themselves, rather than protecting them from fraud. And let me just say one thing. You have Mr.
Antonakes up there and you have Mr. Calhoun on your panel. We all know, with a little
bit of research, why this rule is being put in place. We know that it’s to increase the
market share of Martiniques and the Self-Help Enterprises group of organizations, and to
deny that I think you would be lying. Is that correct, Mr. Antonakes? Thank you, Mr. Wise. Joe Valenti? Thank you. My name is Joe Valenti. I’m with
the Center for American Progress in Washington, D.C. I’m also an Alexandria, Virginia, resident,
so I’m very glad you held the hearing here in Richmond today. Today’s announcement marks
an important first step to better protect economically vulnerable Americans, and consumers
looking to take out loans to meet financial shortfalls deserve the assurance that the
products they’re using will not leave them in a deeper financial hole. I think this proposed
rule has many strengths. Ability to repay is a key provision of responsible lending.
I do have some concerns about the proposed safe harbor. I’m not sure that it goes far
enough. And I’m also concerned about how the proposed rule would interact with states such
as New York, that have tough and effective payday loan protections already in lock. Thank
you. Thank you, Mr. Valenti. Thomas LaSere, Jr.
[ph]? Thank you. My name is Tom LaSere, former President
of the Virginia Short-Term Loan Association. The association was made up of both small
and large lenders operating in Virginia. Personally, I own several payday loan stores here in Virginia
and employ nearly 40 employees. We offered health care benefits to all employees. As
a result of the overreaching government regulations, both the association and my company had to
close. As a small lender, we had to consider ability to repay. We were responsible lenders.
We didn’t have unlimited financial resources. If we loaned money to people who could not
repay the loans, we would no longer be in business. The American consumer needs viable options
for credit. The proposals issued today by the bureau will limit and/or eliminate the
credit options. I wanted to speak today as a representative of small business owners.
Thank you, Mr. LaSere. Kathy Farley?
Hi. My name is Kathy Farley. I’m a district manager in the money service business. I’ve
been in it about 3 years. And when I see a schoolteacher that walks in our front door,
obviously upset because the state had decided to sweep her bank account 10 days prior to
her property taxes being due, and didn’t know how she was going to provide Christmas for
her family, never being in a money service business, not knowing what to expect, we walked
her through the process, made sure she understood the contract, the due dates, and her payment
schedule, were able to offer her a loan and meet her needs. Thanking us for being there
to service her and meet her needs, the last comment she made was is that she’s glad that
we were here to serve her needs, and that she couldn’t walk into her own bank and get
a small loan this quick and easy. Thank you, Ms. Farley. Lance Gumbs? We’d be
happy to take your testimony. Good afternoon. My name is Lance Gumbs. I’m
the Executive Director of the Native American Financial Services Association. We represent
20-plus tribes across the country that are involved in short-term lending. Under the
Dodd-Frank Act, tribes are equal to states in the whole regulatory process of financial
services, and I just want to say that we look forward to working with the CFPB as we go
forward on this rulemaking process. There are 70 million people in this country who
are unbanked or underbanked, and we intend to serve that need. Thank you very much.
Thank you, Mr. Gumbs. Jason Krumbein? My name is Jason Krumbein. I’m a local attorney
and I wanted to talk about people, just like the young lady who had experienced the recent
loan that had turned from a $300 loan into a $5,000 loan. One of the things that I see
in my practice is that people who engage in payday lending have a tendency to enter into
the financial disaster of a bankruptcy, and this is a horrible outcome for virtually everyone
in the financial field, from the payday lenders, up to the mortgage industry, and the car lending,
credit cards—everyone is suffering a disaster. The other thing that is a continuing problem
for these people is that after they have entered into these loans, they continue to get calls,
sometimes on paid loans, from collectors who are threatening jail. They’re calling from
entities that don’t exist. They’re threatening actions that aren’t even actual crimes. This
needs to be stopped. Thank you. Thank you, Mr. Krumbein. Ms. Shirley? We only
got a first name. Ms. Shirley? Hello, everyone. My name is Shirley. I’ve
been on my job for 46 years of service with the state, but that’s irrelevant. I just want
to let someone know that payday loan, title loan, and any other kind of loan that you
can get where you don’t have to worry about going into a bank and they telling you 600
and all this about a credit report, when you done did 50 years and 30 years on paying a
mortgage, what do you think about that when everything was excellent and everything was
paid? Nobody get the credit. I have a cousin who if it wasn’t for a payday
loan, she’d be dead. That’s right. It’s taking care of her chemo, took care of my best friend’s
foreclosure. Where was the banks at then? And that young lady did 30 years for the state.
When you got to go into the bank and you got to hear about your credit, what about my credit
and that credit——and I thank God, and I just want to let everybody know
I think it’s the greatest thing that could have ever happened to help people that need—. Thank you, Ms. Shirley.
Reverend Charles Swadley. Charles Swadley? Thank you very much for this opportunity.
My name is Charles Swadley. I’m a United Methodist clergy. I am chair of the Commission on Interfaith
Relations for the Virginia Council of Churches. I’ve served churches for 36 years, and I can
recall with great clarity, the people that came to my office on many occasions, especially
during that recessionary time when it was so bad. We gave out $20,000 from our church
to different people, but we had people come into the church who had gotten hooked on loans,
short-term loans that they simply could not bear. We had people that were in a group home
that had multiple loans that they could not bear. We had young people. We had old people.
We had people near bankruptcy. We had people that were on their knees crying. We had people
that couldn’t simply bear this high rate, triple-digit kind of baggage that is put on
them. There needs to be oversight. There needs to be care for people, but there needs to
be alternatives, not just the ones that have no regulation or minimal regulation or things
that we are hearing today that it’s all jim-dandy. No, it’s not. I’m on the front lines. I was
there. I was with people holding their hands and being beside them, and it ain’t so. It
ain’t good. Thank you, Mr. Swadley.
Lori Phipps? LORI PHIPPS: Hello. I’m Lori Phipps, and I’m
manager here at Virginia Cash Advance here in Hampton, Virginia. Our company is a small
business headquartered in Missouri, and we operate two stores here in Virginia. We offer
only payday loans. I’ve been with the company 20—excuse me—9
years, and I can honestly say they’re a fantastic company to work for, with many employee benefits,
and they’ve been great in helping me provide for my family. There’s been a lot of talk
about the CFPB making rules for our industry. My company supports regulations that protect
our customers, but Virginia had a new regulation that went into effect in 2008 that cost many
of our employees their jobs as well as customers more harm than good. We had to close four
stores. We relocated many employees, but also many of them lost their jobs. We devoted much of our time to preparing customers
for what was coming, but they didn’t understand. They asked why the government was not going
to let them get the credit they needed and why they couldn’t take care of their finances
on their own time tables rather than made up by legislators. If the CFPB makes a rule that is as strict
as Virginia’s, it will be devastating for many customers. So I’m asking you to please
consider the impact of your actions not only on small businesses, but also on short-term
loan customers of every size business. Thank you. Scott Berger? Scott Berger?
Alvin Lee? Hi. My name is Alvin Lee, and I am a satisfied
customer with Check City. I’ve been retired 17 years. I’ve been banking with a credit
union 44 years, and when I had problems, they wouldn’t even give me a loan. And I’m still
a customer of the credit since 1970. So every now and then, I run into a shortfall, and
it’s been 6 years. I’m satisfied with everything that I get—when I’m in need. All I have
to do is go there and talk to them, but they look at my application. They look at my salary.
I have to sign all the papers about military, and every time, they tell me it’s a short-term
loan. I understand it, and that’s the way I go. But in regular financial institutions, they
are not their brother’s keeper, and all of you all know that, and I think you all need
to get on these people that buy the debt and do all this crazy stuff. I don’t know if it’s
the payday loans themselves. I think it’s the people that they sell the debt to that
do all that stuff. I’ve heard of it, but I hope you all don’t do anything to close these
businesses. They may need some changes, but I’ve been a customer of the credit union 44
years, and when you have a hard time, they don’t want to talk to you. Thank you.
Thank you, Mr. Lee. Jim Willis? Could you wait for a microphone?
I’m sorry. Again, my name is Jim Willis. I work for Check City. I’ve been with the company
for 15 years and oversee six locations here in Virginia. Check City is a small family-operated business.
We are based out of Provo, Utah, and we operate in six states, and we adhere to strict regulations
in all of them. We offer best practices, which go far and above state laws. I’m not here
today to argue against regulation, but I’m here today to argue for my customers. In 2008, Virginia introduced new regulations
for our industry. Unfortunately, our customers didn’t fully understand the impact that it
would have on them. I have personally witnessed mothers with babies in tow who would come
into our stores and have to cry because we had to deny them credit. Why? Because someone
outside of their home decided that they didn’t need the money. I’ve witnessed customers not trying to take
advantage of the system, but responsible people with a genuine need.
Thank you, Mr. Willis. Isaiah Jefferson?
I’m here to offer support to the Consumer Financial Protection Bureau, and I’m also
here to support the Virginia Attorney General, Mr. Herring. I’m sure there’s a need for the
services of these lenders, and I’m also sure they need to be regulated, not to run them
out of business or cause them a problem, but because money is involved. And there are unscrupulous
people wherever money is involved, and to take advantage of those that may not be able
to protect themselves, I think it’s a legitimate government function. My government is not
the boogeyman. It’s we-the-people’s government. If you think this government is the boogeyman
and every time they try to do something, it’s dictator and this and that, it’s not true. So all I’m saying is I support the regulations,
as proposed, if they are to make the business a better business. Thank you, Mr. Jefferson.
Adam Rust? Hi. My name is Adam Rust. I’m at Reinvestment
Partners in Durham, North Carolina. One of the unique things about us is that we’re not
only a public policy group, but we also provide direct services to low-income people. In a
city of 250,000 people last year, we provided free tax preparation to over 1,000 people
and helped many more avoid foreclosure with loan modifications, and the hard truth that
we see is that a lot of folks face difficult financial circumstances. And since we see
them over a period of years, we see that they were in difficult financial circumstances
before, they are today, and they will probably be in the future. And a payday loan isn’t
going to help right their ship. It’s just going to set them back one step further. So we support the proposal that the CFPB has
put forth for prevention and protection because we think it fits with what’s needed. In fact,
our only real concern is that the proposal be weakened over time. We really want to emphasize
that the CFPB’s proposal makes sense, and we want to make sure that it doesn’t circumvent
the good state laws that we already have in North Carolina.
Thank you, Mr. Rust. Reschin Moore? Reschin Moore?
Hi. My name is Reschin Moore. I’m proud to be an American, but under this administration,
it’s hard to be a happy, proud American. I’m a working mom. Under this administration,
the NSA, IRS, Obamacare, CFPB, Department of Justice, they are threatening our freedoms
and rights. We don’t need more regulations, overreach, and oppression. Under this administration, I pay more for
health care, cost of living, health insurance. I work. I pay my bills. I pay my taxes. This
administration, CFPB, hurts hardworking Americans. It’s getting tougher to work to make ends
meet. We don’t need more regulations. We don’t need to be told how to borrow or spend our
money. We need our freedom back. Thank you, Ms. Moore.
Heather Crislip? Hi. I’m Heather Crislip, and I’m with Housing
Opportunities Made Equal of Virginia. We’re a Virginia’s Fair Housing organization, and
we also do extensive housing counseling, including first-time homebuyers and foreclosure prevention.
We have advocated for payday lending reform for the obvious reasons that they can rob
families of wealth-building opportunities that homeownership can provide in addition
to intentionally preying on vulnerable communities. Two years ago, HOME released an opportunity
map of the Richmond region where we replicated a methodology developed by the Kirwan Institute
at Ohio State. We found that access not only to credit, but sustainable mainstream credit
is largely determined by where you live. The impact on opportunity that access to credit
has on these neighborhoods is undeniable. Communities that are able to access mainstream
sustainable loan products are more likely to retain their wealth and to pass it on to
future generations. Conversely, communities that are targeted for unsustainable mortgage
products or payday loans by predatory lending institutions have their wealth stripped from
them. Payday lending institutions target low-income
neighborhoods, further stripping their communities of wealth. In high-opportunity neighborhoods,
it is nearly impossible to receive a loan from a payday lender simply because there
are none to be found. Thank you, Ms. Crislip.
David Woolrich? David Woolrich? Good afternoon. My name is David Woolrich.
I’m a citizen of the River City here in Richmond, Virginia. And I’d like to say I’ve utilized the payday
loan service several times. I have a slight disability, a handicap, and I’m on a fixed
income, and there’s been times that I couldn’t make ends meet. And I visit one of our local
loan companies here, Check City, here in Richmond, and they treated me very well. And I had no
problem with paying them back. If I wasn’t able to pay them back on a set date, they
would give me more time as long as I paid a little interest on it, and I want them to
stay around, for one, because there’s a lot of us who are on a fixed income that really
need the payday loan service like them. Thank you.
Thank you, Mr. Woolrich. Tom Wayland? My name is Tom Wayland, and I proudly oversee
operations at 75 storefront locations that provide short-term loans and financial services
in eight southeastern states, including Virginia. My locations support 190 employees, with compensation
packages that include steady, competitive income, benefits, and other compensation. You have heard about how short-term small-dollar
loans help customers save money and maintain their credit stores by avoiding bounced checks
and late payment—late bill payments, both of which carry harsh consequences. I’d like
to underscore the fact that our customers also understand the value we provide, as evidenced
by our consistently high customer satisfaction scores and consistently low complaint rates. Our customer satisfaction scores are invariably
higher than those of retailers, banks, and other financial institutions, a fact that
is anecdotally evidence in our branches. Our customers regular thank us, often calling
us a “godsend” for helping them to make ends meet in crucial circumstances. And while the
Bureau and others have aggressively solicited consumer complaints, the sheer lack of those
complaints per number of transactions speaks volumes about the need we are serving and
the service we are providing. Thank you. Thank you, Mr. Wayland.
Rodney Hunter? Rodney Hunter? My name is Rodney Hunter. I’m a minister here
in Richmond, Virginia, and our church many times offers assistance and helped so many
who have needs, but the institution that loans money does not always make sure that persons
are able to repay. One woman was in my office on Saturday who
had a $300 loan. She needed $800. It was at the interest rate of 264 percent and finance
rate of $600. That is just not right. I mean, it’s one thing to say that you’re able to
offer assistance, but that’s robbery to take money at a high interest rate that people
cannot afford. And we’re just here to say, yes, we want fairness when it comes to making
money available to persons in need. Thank you.
Thank you, Mr. Hunter. Alison Denrun? Alison Denrun?
Hi. Thank you. I’m Alison Deguisne, actually. I’m a small payday lender in the State of
California. A year ago, I had two stores. As of today, I have one left. I’m probably
going to be shutting my doors very soon. I urge the CFPB to consider the small businesses
that could be shut down because of over-regulations or too strict of rules that make it difficult
for us to stay in business. Unfortunately, Operation Choke Point is the reason that I
am going out of business. My bank accounts are shut down. I’ve tried over 50 banks, trying
to find an account to be able to run a legal business that’s been compliant, and I am unable
to find bank accounts. And so I urge the Director to please get involved with the FDIC and stop
things that are shutting down small businesses as well as the CFPB rules. Thank you.
Thank you. Andrew Langer? Andrew Langer? Good afternoon. My name is Andrew Langer.
I’m President of the Institute for Liberty, a D.C.-based organization. I’m also a Virginia
resident, and it’s interesting that the other person brought up Operation Choke Point and
the impact that’s had. Look at the last—. As this administration has increased
regulatory oversight into the financial services area, credit has found itself shortened, and
people have found themselves without credit or underserved by credit. And I warn you all today, especially my brethren
in the Christian churches, that if this rule goes forward, you are going to be overwhelmed
by people coming to you in need because this industry will not be made available to them.
The fact is we know from the House Government Reform and Oversight Committee that the overall
goal, acting with personal animus, as Congress has said, that the goal of this administration
is to destroy the payday lending industry. When that happens, those who are engaged in
non-profit charitable work will be called upon to serve, and you will be unable to do
so. These are lenders— These are lenders of last resorts.
Thank you, Mr. Langer. Cassandra Shaw? Cassandra Shaw?
Donna Stallings? Hi. My name is Donna Stallings, and I work
for a non-profit housing counseling agency, and I see people on the other side. And so
if we all agree that people need to have access to credit, the question is at what cost.
Thank you, Ms. Stallings. Patricia Bolden? Good afternoon. My name is Patricia Bolden,
and I’m just an average everyday mom of two, and I fall short sometimes, and I need a loan
like right now. A bank won’t give it to me, and I’m a customer of Check City. And I’m
proud that they are three, and I’m happy they are there. And I just would like them to stay
there. Thank you. Thank you, Ms. Bolden. Martin Wegbreit? Martin
Wegbreit? Good afternoon. I’m Martin Wegbreit, an attorney
at Central Virginia Legal Aid Society. Over the past 10 years, I’ve reviewed 7,500 requests
for bankruptcy in Richmond, Petersburg, Charlottesville, and the surrounding 17 counties and cities.
Payday loans, vehicle title loans, and other forms of predatory lending are the third leading
cause of bankruptcy, right behind medical and credit card debt. These products are toxic.
If you don’t have $500 today, you are unlikely to have $500 to $75 to repay in 2 to 4 weeks.
You will fall into the debt trap and eventually bankruptcy. We don’t allow marketing of toxic
products such as cars without seat belts because they are too dangerous. The same is true of
predatory loans made to people with no realistic possibility of repayment. Thank you.
Thank you. James Zahradka? James Zahradka? Hi. I’m James Zahradka with the Law Foundation
of Silicon Valley, which is a place of a lot of wealth and a lot of hidden financial distress.
We represent thousands of people every year who come to us with problems in their financial
lives, including many people with payday loans. Now, I heard someone on the panel dismiss
these types of stories as anecdotes. These are real people. These are my clients in my
office telling what’s happening to them, but it’s not just individual stories. The statistics
bear this out. People who take payday loans are more likely to be evicted, to declare
bankruptcy, to forego medical care, and to lose their bank accounts. So that individual
human stories, the statistics, sound social science backs this up. In California, our state legislature is being
in a stranglehold from the payday lobbyists. We need the Consumer Financial Protection
Bureau to enact common-sense regulations. Thank you. Thank you, Mr. Zahradka. Milton?
I only have a first name, or it could be a last name. Milton?
I’m Milton Ford. I am customer of Check City, used them one time and greatly appreciate
what they did. There was no hidden fees. There was no entrapment. When I paid the loan off,
there was no “You need it again.” No, I didn’t need it again. They didn’t ask. I’d just like
to know that they are there in the future and able to give out a loan again if I need
it. I am a father of three children, and sometimes people get down and out, and they need help.
And if you can’t afford the loan, don’t sign the contract.
Thank you, Mr. Ford. Matty Harrison? Thank you for the opportunity to speak for
just a minute. This is not what I do full-time, so I really appreciate the opportunity.
First of all, I’ve changed what I wanted to say. I just want to tell you how impressed
I am with the people that are in the payday loan business, how sharp and articulate and
bright they are. These aren’t monsters that we’ve been describing that are after customers.
The market that they work in and live in is a really fierce force. I mean, you have to
treat customers right, or customers go somewhere else. You have to make your product cost effective
or customers go somewhere else. We know that. And another comment I’ve heard a number of
times today is about giving poison to a dying man, and we know that alcohol has tremendous
negative consequences from DUIs and wrecks and stuff like that, but there’s no alcohol
banding board out there. And people, we just need free—we need common-sense freedom,
people making their decisions as they feel best suited.
Thank you, Mr. Harrison. David Blom? David Blom?
Yeah. Good afternoon. My name is David Blom. I’m with Lorraine Enterprises, part of the
small business community, and I’d just like to say that I am a firm believer that less
government rules and oversight is better than not more, especially for small businesses
managing their own issues. I grew up believing in the free marketplace
as a business owner and seeing that work and operate and understand that to be an important
part of the American dream. So I am going to encourage the CFPB to use caution in going
too far in overregulating and just let the markets work out this. The consumers and businesses
need to be able to make a choice. Thank you, Mr. Blom. Alex Carroll? Alex Carroll?
My name is Alex Carroll. I stand here to represent the faith-based part of Northern Virginia,
and as I listen to what I have heard, the one common thing is, I think we all agree,
there is a need, and the need must be addressed. The need must be addressed. Now, I heard somebody say now, “But at what
cost?” and so I would urge the Bureau to remember your charter. Consumer Financial Protection.
Protect the consumer. Thank you, Mr. Carroll. Jarrod Martin? Jarrod
Martin? Jarrod Martin with IFO out of Ohio. We have
about 50 employees, and I’m really glad that people have been saying things about the benefits
of these loans because it’s not all bad. I think the rhetoric is very dangerous when
it comes to the poison people have been talking about and the dying men. It’s very dangerous. We see the good that we provide our employees
and their families, our customers. We see benefits beyond this sort of negative reaction,
and I would really urge the CFPB to regulate beyond the negative, beyond the worst-case
scenario, because that gets really dangerous when you’re only regulating on the worst case
instead of seeing maybe some sort of silver lining and things, so thank you.
Thank you, Mr. Martin. Ben Greenberg? Can you hear me? I’m Ben Greenberg. I’m with
Virginia Organizing. I’ve been working at the legislature with some wonderful people
and organizations for 9 years trying to do something about predatory lending, and unfortunately,
we’ve only had very limited success. So I would like to applaud you for your proposed
regulations and putting consumers first. I’d also like to thank you for having the
hearing here in Richmond. By doing so, there are scores or maybe even hundreds of staff
people from lenders who are here instead of making loans in their offices, and I think
that’s protecting Virginia consumers too. Thank you.
Thank you, Mr. Greenberg. Charles Swadley? Charles Swadley?
I already spoke. Ward Scull?
Thank you very much. I’m Ward Scull from Newport News, Virginia, and the owner of a small moving
company, and several years ago, an employee came to me and wanted to borrow $300. And
it turned out that she had six payday loans to $1,700, and she was paying over $255 every
other week for interest, or about $6,000 for a $1,700 loan. I then got involved and created Virginia is
Against Payday Loans, and we are submitting to you today the case against predatory lending
in Virginia, and we appreciate you accepting that testimony. In Virginia alone, profits from predatory
lending approximate $150 million. Then a borrower gets trapped in a cycle of debt. Adam Smith,
the founder of the Free Market Economy supported reasonable limits and interest rates. Every
signatory of the Declaration of Independence and every member of the Constitution returned
home to the state with caps. Open markets and free enterprise are the foundation of
an affluent society, but unfettered financial practices are neither more nor consistent
with sound financial practices and systems. Thank you.
Thank you, Mr. Scull. And I’d like to thank everyone. You all have provided very thoughtful
and varied comments. They are greatly appreciated. I want to thank the audience, the panelists,
and all those watching via live stream at This concludes the CFPB’s
field hearing in Richmond, Virginia. Have a great afternoon.

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