Last week’s first public meeting involving the Consumer Financial Protection Bureau (CFPB) and relating to the payday loan industry was eagerly anticipated and was well attended. The meeting took place in Birmingham, Alabama and hundreds of storefront instant cash loan companies were in attendance. It is the beginning of the CFPB’s involvement in the industry, which it says is not well regulated. Supporters of short-term loans say that it provides a necessary service to consumers who have been neglected by banks. Indeed, many homes lack active bank accounts or else they don’t have credit cards. As a result, they aren’t eligible for bank loans and if they have a financial emergency, there is nowhere left to turn.

A Sudden Fall

The payday loan industry has enjoyed a meteoritic rise in the last decade, reaching a peak in 2006 when there were more than 24,000 emergency cash loan stores operating. However, tight state regulations in recent years have seen almost 5,000 of these stores close with others coming close to extinction. There is a genuine fear that additional legislation from the Federal government will all but finish off the industry. While this seems to be good news according to consumer groups, proponents of payday loans suggest that opponents are being short sighted. They fear that loan sharks will start to become more relevant in society and there are genuine fears for low-income families.

Statement from Payday Lenders

The storefront lenders who made their way to the meeting in Birmingham made a joint statement afterwards. In the statement, short-term lenders said that they appreciate the fact that the CFPB was willing to hear from stakeholders before they began introducing new regulations. It was pointed out that payday loan stores issued 110 million loans to 20 million Americans in 2011. The companies said that they were proud to be able to deliver a service to those in need and urged people to recognize the importance of small loans.

The statement continued by mentioning the existing legislation put in place by the states where short-term cash loans are still legal. These companies are adamant that they work hard to ensure they meet the existing regulations because it is in their best interests to protect the consumer. Storefronts also said that they intend to continue complying with all state and Federal legislation relating to the industry and they will continue to adhere to their set of Best Practices which include honest advertising and an Extended Payment Plan to customers who can’t meet their repayment requirements.

Payday loan companies reject the notion that their loans are nothing more than a ‘debt treadmill’. According to Jamie Fulmer of Advance America, a short-term loan company based in South Carolina, consumers will find it hard to find a product that offers such full disclosure anywhere else in the financial marketplace. Certainly, bank loans are far from clear and additional penalty charges are often difficult to decipher. While there is no doubt that there are a few bad apples in the payday loan bushel, harsh regulations which affect all emergency loan companies would be a disaster.

Related posts:

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  2. Why Instant Cash Loan Companies Are More Honest Than Banks