Audio clip
Bob Corker
Audio clip
Allan Jones
U.S. Sen. Bob Corker, R-Tenn.., said Wednesday he believes Senate negotiators are close to a bipartisan agreement over a new set of financial industry regulations.
But proposals for federal controls over non-bank lenders continue to spark debate between payday lenders such as Check-Into-Cash Inc., in Cleveland, Tenn., and critics of the $6.5 billion-a-year payday lending industry.
Mr. Corker, the Republican point man in Senate negotiations for new financial industry rules, said he is working with Senate Banking Committee Chairman Christopher Dodd, D-Conn., on "a very good middle-of-the-road bill" for financial regulatory reform.
"It's been a marathon now for almost four weeks, but I think we're going to get there," Mr. Corker said of his month-long talks to reach a compromise plan.
The New York Times reported Wednesday that Mr. Corker, who has been supported by payday lenders, pressed Sen. Dodd into limit the authority of any new consumer protection agency to directly regulate payday lenders, debt collectors and other non-bank financial companies. Enforcement of any new consumer rules will remain with existing regulators, which are primarily at the state level for payday lenders.
"There are appropriate checks and balances in the rule-making which everyone has now agreed upon," Mr. Corker said.
capping interest rates
U.S. Sen. Richard Durbin, D-Ill., is pushing a separate measure to cap the interest rate for payday loans to no more than an annual rate of 36 percent.
Advocates for such interest rate caps, such as the Center for Responsible Lending, claim borrowers often get stuck in a cycle of debt by having to pay premium rates to borrow money.
"Payday lenders are legalized loan sharks who prey upon those in need," said Kathleen Day, a spokeswoman for the Center for Responsible Lending.
But payday industry leaders such as Cleveland, Tenn., businessman W. Allan Jones said the proposed cap on interest rates would destroy an industry that helps millions of Americans get short-term loans during financial emergencies and "hasn't taken a penny in any government bailout money.
"Our critics are attempting to capitalize of fears and misinformation generated from the recent credit crisis to further their agendas of total federal control," Mr. Jones said. "Small microloans of $200 didn't cause the nation's financial crisis, yet the industry is criticized by those who did the damage."
short-term borrowing
Payday loans usually provide $200 to $400 in unsecured loans that borrowers promise to repay out of their next paychecks. Payday loans usually are priced at a fixed dollar fee. At Check Into Cash in Tennessee, for instance, borrowers pay $15 per $100 borrowed.
The effective annual percentage rate on such loans is 421 percent. But Mr. Jones insists the APR is misleading "since most of these loans are repaid in a couple of weeks" and help consumers avoid even costlier charges for bank overdrafts or late payment fees.
In its annual report released this week, Advance America Cash Advance -- the nation's biggest payday lender -- warned that proposed financial regulations could hurt, or even possibly destroy, its business.
"Any federal law that would impose a national 36 percent APR (annual percentage rate) limit on our services, if enacted, would likely eliminate our ability to continue our current operations," Advance America warned in its Securities and Exchange filing.
Steven Schlein, a spokesman for the payday industry's lobbying group -- the Community Financial Services Association -- said the industry usually makes only a couple of dollars profit on each loan.
"Profits average only about $20,000 a store (annually), so any mandated significant change to our business model would put the industry out of business, and where will consumers go for this type of short-term credit?" he said.
Payday lenders have reduced or withdrawn operations in states such as Arizona, Georgia and Ohio where stricter controls were imposed on payday loan rates.
payday campaign
BY THE NUMBERS
* $400 billion -- Total value of loans made by payday lenders in 2009
* $6.5 billion -- Loan commissions on payday loans in 2009
* 77,000 -- Number of employees at payday lenders
* 22,000 -- Number of storefront payday lenders in 34 states
Source: Community Financial Services Association
Payday lenders also are regulated by the Federal Trade Commission for loan disclosure and advertising. But faced with the prospect of a federal consumer agency regulating such loans, the payday lending industry tripled its campaign contributions and lobbying efforts from 2005 to 2008, according to Citizens for Responsibility and Ethics in Washington. The nonpartisan group, and related records at Opensecrets.org., show that Mr. Corker received at least $31,000 for his campaigns from Mr. Jones and others at Check-Into-Cash and another $6,500 in the past two years from Advance America's founder, George D. Johnson Jr.
But Mr. Jones said he hasn't talked with Mr. Corker about any payday lending issues in more than a year. Mr. Corker denied that contributions from payday lenders have influenced his efforts on financial reform.
Mr. Corker, once a director for a SunTrust Bank affiliate, also has received campaign contributions from a number of banks that are pushing for more regulations of nonbank identities, he said.
Click here to vote in our daily online poll: Do payday lenders need more government oversight?
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PLEASE DO NOT RETURN CORKER TO THE SENATE WHEN HIS TERM EXPIRES.
It is shameful that the senator and other politicians are in the business of promoting the loan-shark industry. The Times is to be commended for running this very informative story.
Im glad, robertoen, that you like Dave's 'article.' You do know that Dave doesn't do much research or journalism stuff... he likes to reprint press releases. I thought that corporations were not allowed to donate to political campaigns.... according to President Obama when he made a political grand-stand in front of members of the Supreme Court during his State of the Union.
Dodd's original legislation from November would give a new consumer protection agency the power to write and enforce rules governing payday lenders, debt collectors and other financial companies that are not part of banks.
Leave it to Corked to clog that up.
We've become a country that can compare it's "regulated" loan agencies with loan sharks.
"Mr. Corker, once a director for a SunTrust Bank affiliate, also has received campaign contributions from a number of banks that are pushing for more regulations of nonbank identities..."
Wake up folks....The opponents of short-term lenders are funded by those who stand to gain billions in fees with the loss of this important consumer financial option.
Remedial Math Question?
If a payday loan is a
$15 per $100 borrowed for 14 days
and the average bank or credit union overdraft "PROTECTION LOAN" is
$27+ on $36 borrowed for 3-4 days
which is the better option for consumers???
Unless you're going to eliminate all the fees banks, credit unions, credit card companies and all merchants can charge for overdraft, late, over limit, etc. as well as $40 Billion in available consumer credit:
CONSUMERS/FAMILIES SAVE MONEY BY ACCESSING PAYDAY LOANS
PAYDAY LOAN INDUSTRY = LOAN SHARK INDUSTRY
SHAME ON YOU SENATOR CORKER
Consumer advocates have done a very good job of bashing and telling untruths about a industry that is strongly regulated.APR CANNOT BE APPLIED TO A TWO WEEK ADVANCE.The industry on an average recieves 15.00 for a 17 day advance with most advances being 200 to 300 hundred dollars but it is an easy target for political grandstanding along with the news media to distort the truths.
The last thing we need is more "feel good" regulation for politicians to tout as a reason to re-elect them.
America is about freedom: one of those freedoms is the right to choose what I do with the money I worked hard for. When you over-regulate products, you are telling customers that they are too stupid to make decisions for themself. In reality, it's the politicians and bureaucrats that are stupid. Politicians, banks, and Wall Street created the financial meltdown - not payday lenders.
And my guess is, for every dollar donated by a payday lender, banks and credit unions have contributed at least double. So good luck with the "pay to play" argument.
Robertoen, from your comment it is obvious you are not thinking about the individuals who cannot go to the bank and get $200 to take care of their electricity before it's turned off and they are charged additional fees to have it turned back on....or the person whose vehicle requires repair before they can make it to their job everyday! Before you continue your name calling maybe you should look around and take note of the people who use the industry responsibly. I think you would be very surprised at who they are!
"a new consumer protection agency"
That sure makes me feel better. More protection from Big Daddy and his spawn (bureaucrats - newly hired no doubt).
Its so funny. I work for a Pay Day Loan Comapny and I get this email to visit this website and vote "NO" on the poll. Its so true how un-ethical and greedy these companies are. we get paid barely nothing to make them rich and then they force us to these polls all over the contry to vote against any type of reform. Its rediculous. ! EP - Area manager
Are we serious? We are talking about another regulation that takes choices away from people that already don't have many options? Is it better to have them write a hot check to buy groceries because they paid an un-expected car repair? Would we rather have them starve? Will the banks give them options to cover bills on a signature loan? NO! All the banks want are the fees and the checks STILL don't get paid. WIN-WIN, if you are a banker! As for the post above- I find it even more sickening that you actually are worried about what YOU get paid- YOU would be the one that's all for raising rates to consumers IF you were paid more! Why work and represent something you don't think has value? Hypocrite! QUIT and find a different job then- maybe as a banker- that way you can charge $30.00 for a returned check that was $10.00 or $30.00 in OD for buying dinner for your family at McDonald's- say, what's the interest rate on that???? You are in it for YOUR OWN gain- you made that VERY obvious with your post! Disgusting.
I believe we should have a consumer agency with only real people in charge to regulate congress thats were the real abuse is taking place.
Hi, I'm from the government and I'm here to help you!
If the payday loan businesses go away, then someone or something will fill that need. More than likely, someone or something that is not legal. Read your history books. It's there.
Corporations don't make donations, as this story rightfully pointed out. The money came from individuals who work at Check Into Cash, primarily W. Allan Jones.
In regards to EP-Area Manager,take responsibility and stop playing the victim, no one is forcing you to vote and no one is making you work for an industry you don't believe in! If you dislike your job and feel you are so under paid, QUIT! You quite obviously know very little about the industry in which you work, if you did, you would be aware of the strict guidelines already in place and the even higher standards of those that are members of the CFSA. If you really are an area manager, you would think you would be a little more educated in your own industry! Perhaps you should stop and learn a little more about the field you work in before expressing your opinion on something you clearly are not quialified to do. I am tired of politicians trying to force their views on me as if I am too stupid to have my own. If I choose to borrow money and pay a nominal fee to do so at a payday loan company, that is MY choice and no one elses! Rather than the politicians making the decisions for consumers, why not let us, we will vote with our dollars. If we don't agree with the industry we stop spending money and they shut down, if they are of use to us, we utilize them when we need it and they stay open. The need for this type of short term credit is real and is some consumers only option when sudden cash needs arise, especially now that credit cards and bank loans are increasingly harder to get! These companies stay open because people need them and use them, stop trying to "protect" me from my own decisions, I have researched my options and this type of short term loan works very well for me when I am short on cash, and the low cost of these loans is just icing on the cake!
I am so thankful to see all the intelligent comments, FOR this industry. I'm not in the payday lending industry; I never have been, but I was in the mortgage industry for more than 20 years.
Would you pay $15 to borrow $100? I sure would, because it's an extremely reasonable fee. If some borrowers fail to meet the pay-back requirement in two weeks (if that's the term) than that is their fault...not the lenders.
I agree with Scooter above that an APR on a two week loan is completely misleading. After all, APR is an acronym for Annual Percentage Rate.
With mortgages, when customers asked why the APR was higher than the "Interest Rate" (and they ALL did) we explained it like this: The APR is the cost of your credit [loan amount + fees] for the first year only, expressed as a annual rate. Hardly applicable in the case of a two week loan.
I also totally agree with MyOwnBoss!
In closing, let me ask this: if a total stranger, with bad credit, living paycheck to paycheck & then some came to you and said "If you will lend me $100 today, I'll pay you back that, plus $15.00 - two weeks from now." Would you lend it to them? I wouldn't.
Let's think about this for a minute. I can get 200.00 dollars for 14 days or untill my next payday or I can bounce a check for 5.00 for 30.00 and it will be paid. I am not sure if anyone else can see the difference here... I sure can. If a person does not use payday lending responsibly then I believe that is the fault of that person and not the lending company!! I do work for a payday lending company and have been in the past a consumer of payday loans. The area manager above surley doesn't know what they are talking about. Payday lending is regulated steeply and the state I live knows everything we do right down to over- shorts in cash on a daily basis. I think that the politicians are in our business enough and that doesn't necessarly just mean payday lending. As bpcr said we are members of the CFSA and they do help regulate and controll things!!
Here's a jewel about how "banking/credit" outfits work;
In the early 60s I needed $100 within two days...go to a bank? Forget it. I had a steady job. So I went to this outfit called Household Finance Corp -- it is still doing business today as HFC -- same logo.
Their neat scam to screw the natives was simple: They loaned me $100 for a year [their minimum] at 12% simple interest [the rate was limited to that under the old usury laws]. I paid them back my next payday.
But the sting here was they took the full $12 interest out of the $100 up front -- so I walked out with $88 cash while paying interest on the $100 I didn't get. And I didn't get anything back when I paid early.
That's how banks work...and how they can pay their execs millions in salary.
Taking a payday loan is an absolute last-chance, family-starving solution; you never stop borrowing and paying and borrowing...etc.
But that is STILL better than a 25% or more a WEEK real-life loan shark...one who enforces his collections with broken arms, legs, etc.
For all you Corker-bashing twits up there, Sen Dodd is complaining that Corker -- the only Republican he could find to back him -- wanted too many conservative concessions to sign on to his [Dodd's] bill without substantive changes.
Of course the NYT [The Dying Lady] slams Corker...it is a LeftProgressive rag after all...what do you expect? Its credibility is lower than Congress'.
Check drudgereport.com for details...if you can avoid the Pelosi'Reid "Virus". LOL
I think that creating any agency that is allowed to make rules and regulations for financial institutions without having to get congressional approval is irresponsible. It will hold industries and citizens hostage to whatever random political appointees are chosen by politicians. If citizens are not pleased with the appointees, we can't vote them out of office like we can with our elected senate and house members. This sounds like a political scam so that politicians don't have to take the hard votes and can keep raising money from industry without have to ever vote for them or against them in the future.
Also, last time I checked $500 loans from payday lenders did not cause the mortgage crisis which led to a recession. It was bad lending practices in the subprime mortgage lending industry. I have no clue why anyone is even arguing over these small time lenders. What they lend as a whole is such a small percentage of the lending market.
Those who take out payday loans are usually those who are least able to afford the fees. They are also enticed by the easy money up front. When the payments come due, on their next paydays, they find that paying that amount out of a future check places a new hardship on them.
There are also "title lenders" who have the borrower sign the title to their car over to them. If these borrowers miss a payment, their car is repossessed and usually sold on-line.
In response to some of the comments, yes, people do need to have someone watching out for them. We have the FDA, the FAA, the FCC, to name some agencies who watch out for our food, medicines, transportation, communications, etc. We have the AMA, who watches over certfication of doctors, the ABA, who watches over lawyers.
Payday lenders seem like they do a service for those unable to get bank loans, but in reality they are preditors of the weakest, which as a country and society we need to protect.
Cora- by all means, protect them! Give them your number so that when they need to pay an emergency visit to the doctor or pick up medicine or pay for a car repair that wasn't in their payday to payday budget- YOU can loan them the money! Glad to see you step up! Or- did you mean by protecting them- we take away their options so they can't go to the emergency room, pay for a prescription or fix their car? Exactly what is your idea of "protection"? I guaranty you that people that vote against payday loans have never had to have one! I mean, if you have used the service- you certainly wouldn't be against it right? So, how about we ask the people that are affected by it- the customers.
Corker needs to go. He is very corrupt and eagerly accepts contributions from W. Allan Jones and Check Into Cash for his "loyalty" towards shady payday lenders.
Read this: Portrait of a Subprime Lender
And this, where W. Allan Jones of Check Into Cash whines that he makes less than minimum wage!!!
https://sites.google.com/site/allanjonessenatorcorkerbffs/home/w-allan-jones-check-into-cash-and-senator-bob-corker-are-greedy-and-corrupt
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