From Huliq News (7/13/09)
Community Financial Services Association of America, a payday loan industry leader, promoting a responsible regulation of the payday advance, says the New York Times editorial board demonstrates an extraordinary lack of depth and knowledge of the payday advance industry in today’s editorial which calls for restrictions on the industry.
The editorial references a consumer group paper about customer usage-a consumer group that has already been criticized by data collectors for it misuse of their data-while ignoring a large body of research that demonstrates how payday advances help consumers improve welfare and prevent financial disruptions.
A small sample of the research ignored by the New York Times includes:
In “Restrictions on Credit: A Public Policy Analysis of Payday Lending,” Petru S. Stoianovici of The Brattle Group and Michael T. Maloney of Clemson University, says: “There is no statistical evidence to support the ‘cycle of debt’ argument often used in passing legislation against payday lending.”
Professor Adair Morse at the University of Chicago says in “Payday Lenders: Heroes or Villains?”: “Natural disasters induce an increase in foreclosures, but the existence of payday lenders significantly offsets this increase….”For these individuals, the existence of payday loans raises welfare….”If the existence of payday lending is valuable for those facing personal disaster in a way that other financial institutions cannot provide, then regulators should strive to make access to finance easier and more affordable, not ban it.”
Donald Morgan, a researcher at the New York Federal Reserve conducted a study “Payday Holiday: How Households Fare after Payday Credit Bans” that concluded: “Georgians and North Carolinians do not seem better off since their states outlawed payday credit: they have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 (“no asset”) bankruptcy at a higher rate.”
A study conducted at George Mason University and Colby College, “Restrictions on Payday Loans Do More Harm Than Good,” says: “…a growing body of research, including ours, suggests that access to payday loans can benefit borrowers, so long as they do not abuse the product….banning payday loans, or severely restricting their availability by capping interest rates, harms the very people whom consumer interest groups and their political allies are trying to help.”
About the Community Financial Services Association of America
The Community Financial Services Association of America (CFSA) is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA’s Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers.