Community Financial Services Association of America
The payday lending industry has been the source of ongoing controversy due to its lobbying tactics and business practices that The New York Times' chief financial correspondent Floyd Norris bluntly calls "predatory lending".
A central criticism of the CFSA member companies has been that payday loans are "designed to keep borrowers in debt". While payday loans are marketed as “one time” or “emergency loans”, the nonprofit Center for Responsible Lending has found that "borrowers who receive five or more loans a year account for 90 percent of the lenders’ business", and "lenders…collect 90 percent of their revenue from borrowers who cannot pay off their loans when due, rather than from one-time users dealing with short-term financial emergencies". The U.S. PIRG has documented how payday loans create a “debt cycle” through high cost rollovers, additional fees, and debt collection. Payday lending practices have fueled calls for increased governmental regulation, and several states have taken legislative action to cap interest rates or outlaw payday lending altogether. CFSA states that it is open to working with state regulators and disputes the negative impact of its lending practices.
Payday loans and soldiers
The United States Senate asked the U.S. Department of Defense to conduct a study on the impact of predatory lending on U.S. troops as a provision of the 2006 National Defense Authorization Act. When the Department of Defense submitted its report to Congress in August 2006, payday loan companies came under attack. The report found that the prominence of payday lending among U.S. servicemen and women was compromising U.S. military readiness and troop morale, and that payday lenders were specifically targeting U.S. military personnel. The CFSA disputed these findings, claiming that it only looked into the research of payday lending opponents. As a response to these and other charges, the CFSA initiated a US$10 million education and advertising campaign it claimed would help inform borrowers and improve the lending practices of its members. The CFSA hired Eric Dezenhall, a public relations specialist, to improve its image.
In 2007, the DoD created new regulations that placed a maximum limit of 36% on the annual percentage rates charged to U.S. servicemembers and their families for payday loans, vehicle title loans, and tax refund anticipation loans.
- Alternative financial services in the United States
- Operation Choke Point
- Predatory lending
- About CFSA
- In Defense of Predatory Lending? - Floyd Norris - Business - New York Times Blog
- Marketplace: Trapped in financial quicksand Archived 2011-05-20 at the Wayback Machine
- Facing South: Payday lending = financial quicksand Archived 2006-12-08 at the Wayback Machine
- [ http://www.usmilitarylendingcorp.com/Financial_Quicksand_Payday_lending_sinks_borrowers_in_debt.pdf "Financial Quicksand: Payday lending sinks borrowers in debt"]
- "Predatory Lending In Lane County: A Survey Of Payday Lending In Eugene And Springfield", U.S. PIRG.
- "North Carolina Declares Victory In War On Payday Lending", Consumer Affairs, March 2006.
- "Cashback Payday Loans Banned In New York", Consumer Affairs
- "Myth vs. Reality", Community Financial Services Association of America.
- Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents (PDF). Washington, D.C.: U.S. Department of Defense. August 9, 2006.
- Diana B. Henriques (December 7, 2004). "Seeking Quick Loans, Soldiers Race Into High-Interest Traps". The New York Times.
- Chamberlin, George (April 16, 2007). "Efforts to regulate military payday lending draw flack". San Diego Source.
- Predatory "Lending And The Military"
- "New DoD Predatory Lending Regulation Takes Effect". U.S. Department of Defense News Release (Release No: 1168-07). October 1, 2007.