AFSPA Association
Examination of Small-Dollar
Credit Consumers
Payday Lending
Statutes by State

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May 18
    U.S. Sen. Ted Cruz (R-Texas) sent a letter to Consumer
    Financial Protection Bureau Director Richard Cordray
    requesting that he publicly make clear that the agency will not
    participate in Operation Choke Point or any similar initiative.
    Operation Choke Point is an enforcement initiative designed to pressure
    banks and other financial institutions to terminate the accounts of
    certain politically disfavored businesses, such as casinos, tobacco
    distributors, payment processors, and short-term lenders. Even gun
    stores, which engage in constitutionally protected activity under the
    Second Amendment, were targeted. Based on this initiative, I have
    concern that the Consumer Financial Protection Bureau may be
    participating in similar discrimination. The recent lawsuit you filed
    against various debt collectors and payment processors concerns us
    greatly, as the suit targets certain payment processors that even you
    acknowledge did nothing illegal.

    Western Sky Loans Are No More, but We Can All Learn a
    Valuable Lesson
    Western Sky Financial was a lending company that charged exorbitant
    fees and interest rates on loans, and ceased operations in 2013.
    Although the company is no longer making loans, the story of Western
    Sky's loan operation is one that shows just how dangerous high-
    interest lending, like "payday loans," can be.
    Western Sky's "loan products"
    Unlike most high-interest lenders, such as payday and title lenders
    (more on them later), Western Sky was based inside the borders of the
    Cheyenne River Indian Reservation and was not subject to U.S. laws
    governing high-interest loans. So, they were free to use unusual loan
    terms -- at least for a while. Whereas most high-interest lending is done
    for short time periods -- such as 31 days or less -- Western Sky's loans
    came with terms ranging from 12 months to seven years. Interest rates
    depended on the specific loan terms, but the typical interest rate on a
    Western Sky loan was 135%. As if that wasn't enough, while there
    were no up-front fees per se, there was a fee associated with each
    loan that was simply added onto the loan's balance. And, these fees
    could be large. For example, if you wanted to borrow $500, you had to
    take out an $850 loan, of which you received $500 and Western Sky
    pocketed the rest.

    Woman Sues Debt Collector, Wins $83M
    A Missouri jury ordered a debt buyer to pay nearly $83M to a Kansas
    City woman it pursued for a $1,000 credit card bill she didn't owe, NPR
    affiliate KCUR reports. The jury found Portfolio Recovery Associates
    LLC guilty of violating the Fair Debt Collection Practices Act, for which it
    will pay $250,000 in damages, as well as maliciously prosecuting the
    woman, Maria Guadalupe Mejia, over the debt that did not belong to her.
    For the malicious prosecution, the jury awarded Mejia $82.9M in punitive
    damages. PRA Group Inc., which owns Portfolio Recovery Associates,
    sent an email statement to "This outlandish verdict defies all
    common sense," wrote spokesman Michael McKeon. "We hope and
    expect the judge will set aside this inappropriate award, and we plan to
    file motions to make that request formally in the near term. Any fair
    reading of the facts of this case makes plain that a verdict of this size is
    not justice by any means, and cannot stand."
    Portfolio Recovery, one of the nation's largest debt buyers, sued Mejia
    in February 2013 over the credit card debt, though the actual debtor
    turned out to be a man in Kansas City, Kansas, with a name similar to
    Mejia's. The company pursued Mejia for the debt for 15 months after
    she first received notice of the lawsuit. In a written statement to KCUR,
    Mejia said, "The lawsuit terrified me."

    Actual Human Experience Missing from CFPB's Short-Term
    Lending Rules by Lawrence Meyers
    Tony Pierce's May 5 column, "CFPB Must Prioritize People Over Payday
    Lenders", drips with unintended irony, for the CFPB never actually
    visited any stores or talked directly with borrowers (i.e. people) to learn
    what actually goes on in the trenches. To review, the Consumer
    Financial Protection Bureau recently released its proposed rules for
    short-term small dollar loans, often known as payday loans and auto
    title loans. Despite the bureau's repeated insistence that it recognizes
    the need for such products in the marketplace, its prescription to
    "eliminate debt traps" is akin to treating dandruff by decapitation.
    The proposed rules indeed accomplish only one thing: they hurt the
    short-term credit business entirely. In any economy, when supply is
    restricted, consumers are forced to more expensive choices. In this
    case, they will return to the form of credit used before payday lending:
    deliberately writing checks until their next paycheck gets deposited.
    Instead of paying some $60 for a single $400 loan, the consumer will
    now incur $50-60 in merchant and overdraft fees for each check.
    It brings to mind Ronald Reagan's famous quotation, "The nine most
    terrifying words in the English language are: I'm from the government,
    and I'm here to help". How is it that an agency that has allegedly studied
    these products for some four years should ultimately deliver a death
    sentence to a $40 billion industry utilized by some 12 million Americans
    every year?
    The more cynical insist it stems from an ideological hatred of short-term
    lending, that consumers lack the intelligence to choose from among
    credit products, for who would choose such loans? The more idealistic
    believe that the bureau crunched the numbers and honestly believes
    these rules serve the consumer.

    Facts about the payday loan debate in ALABAMA: by Max
    Woods from Borrow Smart Alabama
    From looking at the facts, it's clear current database regulations that
    threaten to close stores would not only cripple the industry, but would
    send Alabama borrowers to the more expensive and less-regulated
    world of online lending.
    We would shutter Alabama-owned businesses in favor of outsider
    entities that are not affected by these regulations.
    If protecting consumers is our goal, then we should follow the facts
    and come up with solutions that acknowledge the situation we're in, not
    put consumers into worse situations. We should create regulation that
    doesn't serve the best interests of unregulated online lenders. We can
    create regulations that not only serve consumers, but also level the
    playing field for Alabama small business owners and mitigate the often-
    harmful influence of unregulated online lenders.
    We in the industry welcome regulation. But we should have regulation
    that follows all the facts.
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