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Operation Choke Point: Obama Administration Accused of Last-Ditch Effort by Payday Loans Providers

Payday loans providers blame the Obama administration for attempting to utilize Operation Choke Point to shut down their industry. This has caused a situation of urgency where businesses are not being able to perform their basic functions, such as paying their employees and have also lost numerous banking relationships. A group of short-term lenders requested for emergency relief from a federal judge in the District of Columbia from the government program. CEO of Community Financial Services Association of America (CFSA), Dennis Shaul, said that immediate relief is more pressing than ever. CFSA represents about 9,000 brick-and-mortar short-term lenders. Dennis firmly believes that without an injunction against Operation Choke Point, some members of the CFSA will be compelled to slim down or completely shut down their operations. In 2012, the Justice Department designed Operation Choke Point to attack telemarketing, internet, mail and other widespread market fraud by restricting scamsters’ access to the system of banking. The Justice Department teamed up with the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to crack down on scams by making use of the federal regulators to put pressure on banks to not provide services to businesses that are fraudulent. However, critics of the program are of the opinion that it was utilized to pressurize on legal industries that the Obama administration did not like, such as payday lenders and firearms sellers. One of Obama’s former official of the Justice Department said in April that the program had unconscious, but collateral consequence on the US consumers and banks. Operation Choke Point: A Shadow Campaign A spokesman for Advance America, Jamie Fulmer, said that this program is a shadow campaign. To eliminate short-term lending, regulators are using backdoor tactics. In a 2014 lawsuit filed against the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. for their roles in the program the CFSA and Advance America are co-plaintiffs. Twenty-one banks have already sent their termination notifications to the company since 2013 said Christian Rudolph, Advance America’s chief financial officer. When requesting… Read More

Stepping up to the Plate for Small Payday Advance Loan Companies

As the final days wound down for the Obama administration, it was made crystal clear that the former POTUS wanted to effectively nationalize small dollar, short term loans. In fact, Obama clearly intended for this proposed lending nationalization to be a part of his legacy. However, the measures that the former administration took to effect this lending change could cause big problems for payday advance loan providers. Back in June of 2016, the efforts to hamstring small payday advance loan companies began to become clearer. That is when the Consumer Financial Protection Bureau (CFPB) released the Small Dollar Lending Rule. This rule was clearly set up to cause serious problems for payday advance loan companies. It laid out rules that would “clean up” the short term lending industry. This rule forces payday advance loan lenders to put serious efforts into determining if their customers will be able to repay their loans; like these lending companies weren’t already doing so… Most payday advance loan providers have accepted the fact that this rule is going to take effect. However, many lenders in this industry are asking for is that they not be forced to put in more effort to prove the financial fitness of their clients than lenders who provide mortgages, car loans and other large loans do as part of their loan application process. In other words, payday advance loan companies shouldn’t have to put more effort into providing smaller loans that the big loan companies do. Many industry experts believe that if the proposed rule goes through that it will eliminate 60 to 75 percent of payday advance loan locations. In fact, lending companies have indicated that they would walk away from this industry if the proposal goes through as it was originally written. There are already rules in place that stop big banks from dabbling in the short term lending market. Essentially what you have is a scenario where small payday advance loan companies are squeezed out of the industry, while big banks are blocked from offering small dollar loans. This would effectively allow supporters of Obama’s vision to… Read More

Potential Backlash in New York to Proposed CFPB Federal Payday Rules

The Consumer Financial Protection Bureau (CFPB) has been granted the official powers to act as a watchdog group over the landscape of consumer financial products. The CFPB also happens to have recently released a draft of new federal rules for the payday lending industry. Some opponents of short term lending have said that the new rules are a great start in helping to regulate (some might say over-regulate) the burgeoning consumer lending industry. In New York, though, some financial experts and consumer groups are warning people to take a stand to protect their already effective consumer protection laws. Like New York, there are 13 others states along with Washington D.C. that have laws that cap the interest rates on payday loans. Opponents of payday lending in those states have said that the caps help to prevent payday lending companies from running profitable businesses. Regulators in New York have worked aggressively to stop payday lenders from getting around their laws. Some lending companies have opened operations on tribal lands, or via websites. So far, the regulators in New York have been successful in their bid to keep payday lending out of the state, for the most part. Some payday loans do get made in the state, though. Being as some state leaders seem to detest the payday lending industry, though, these exceptions to the rule are being confronted regularly. Other states, like Missouri and Wisconsin, have more relaxed stances on payday lending. In some of these states there are more payday lending locations than there are McDonald’s or Starbucks locations. The new rules that the CFPB has proposed are not supposed to preempt any existing state laws. However, there are some powerful groups of payday lenders that have made the argument for New York to roll back the state level regulations in order to be consistent with the current federal guidelines. Opponents of payday loans in New York believe that the new federal rules are not as effective as the protections already in place at the state level. These payday lending opponents have started to rile their supporters to make the… Read More

Payday Loans are the Sole Financial Lifeline for Many People

The House Committee on Financial Services recently had a hearing to discuss the Obama Administrations maneuvering and attempts to wage war on the short term lending industry. The Consumer Financial Protection Bureau (CFPB) was created because of the passing of Dodd-Frank and has been on a mission since day one to wipe out short term, small dollar lending companies. Additionally, the bureau seeks to destroy as many of the online lending choices that American consumers currently have access to. The attack on these lending industries is a clear cut case of government overreach and just another case of the government working in cahoots with the big banking industry. People who have a grasp on credit understand that higher risk borrowers are always going to pay higher interest rates/additional fees. That’s just the way it is, and that is what small dollar lenders build their businesses upon. Those who do not like the short term lending industry seem to fail to realize that without the services these companies provide, millions of people would suffer. Getting rid of short term lending might put an end to higher interest rate loans, but it would also eliminate access to credit for millions of people. Folks who need to get their cars repaired or pay for medical bills, but who are unable to get a loan at the bank would just have to do without. That is simply not an equitable equation no matter how you slice it. Though many media outlets have been in the practice of demonizing payday lenders the simple fact is that these unique lending companies provide a much-needed service to the consumers they provide loans for. And despite what the CFPB says, the states that allow these types of loans already do a good job of regulating the industry at a statewide level. Consider the story of Robert Sherrill’s experience with payday loans. He was, in a former life, a drug dealer. He did time in prison, and sought to turn his life around when he got out. Robert could not get a good job, so he decided to start… Read More

Is it a Good Idea to Take Financial Advice from the Consumer Financial Protection Bureau?

By now, just about everyone has heard of the Consumer Financial Protection Bureau (CFPB.) This bureau has been given the task to help protect United States consumers from illegal financial dealings and other misdoings. However, the CFPB has been on a bit of a roll lately. With a nearly limitless budget and the backing of the Obama administration, it seems that this agency is out to spread its influence as much as it can. Case in point – the CFPB recently put together a tool that they plan on using to help measure the financial standing of Americans. They say that they will then be able to better assist Americans with their finances. According to the head of the CFPB, Richard Cordray, “A key part of our mission is providing resources that aid and empower people to lead stable and healthy financial lives. Our financial well-being tool will give financial educators an important means by which to evaluate and support consumers’ financial health.” Earlier this month, the CFPB put out a report that defines their idea of financial well-being. This report draws on information that was obtained via consumer interviews, in-house research and consulting sessions with financial educators.  According to the report financial well-being is, “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.” The CFPB’s tool includes a list of 10 questions that can be used by financial educators when they are working with clients. According to the CFPB, the way that people answer these questions indicates how well off they are financially. The CFPB has created a scale that includes four essential elements that comprise financial well-being. Here are the four elements that are used in the scale: Present day financial security – This is the element that is focused on whether or not people feel like they are in control of their daily and monthly finances. Future financial security – This element is based upon how consumers feel about their ability to… Read More

Are Millennials Making Prepaid Cards More Popular?

It has been well documented that Millennials say they do not care for credit cards. New numbers shed a bit more light on this subject: 65 percent of Millennials do not have a credit card 36 percent have never even had one It seems that prepaid cards are the most popular form of financial products for Millennials. A study revealed recently that 33 percent of young people either currently use or have prepaid debit cards. Just a few years ago, the trend was that only very specific groups, like teenagers and senior citizens, used prepaid cards. It looks like Millennials are bucking the system and are beginning to adopt prepaid cards as their preferred method of managing their money. What is to blame for the rise in popularity of prepaid cards, while credit cards seem to be on the decline? Here are a few things that may be contributing to this phase: Millennials grew up in an era when no one really used cash that much. They were used to seeing their parents use cards instead of checks or cash, so it makes sense that they would want a card-based form of payment to use for their purchases. Prepaid cards also allow people to stay in control of their money a bit more than credit cards allow for. You can set limits with prepaid cards, while it is very easy to get in serious debt with a traditional credit card. In fact, many Millennials watched their parents dig into serious pits of debt, so they would like to avoid making the same mistakes. Prepaid cards can also be integrated with mobile phone apps. The Millennials live and die by their smart phones. Mobile financial apps give prepaid card users the ability to check balances, track spending and even make money transfers, all in real time. So, how can financial providers begin to play catch up with so many young people showing a clear preference for new forms of financial services? For starters, the banks need to worry less about migrating people to full checking account customers and provide integrated services,… Read More

The Consumer Financial Protection Bureau Announced New Mortgage Rules

In 2010 the government established the Consumer Financial Protection Bureau. It is this agency’s job to make sure that the consumer is protected as far as financial matters go. They have recently released a new list of mortgage rules that banks must now follow. According to the New York Times, this is to start next January. With these new rules the Consumer Financial Protection Bureau wants to enforce qualified mortgages. This is meant to ensure the borrower can actually afford the loan. It will also protect the lending institution should the borrower default on the loan. The new regulations say that the borrower must have an income and asset combination that is sufficient to pay back the loan. The goal with this is to make sure that before someone gets a loan that they are able to pay for it. If they are not able to pay back the loan, then the borrower will end up in over their head with debt, and no way to pay back the loan. This can really ruin the borrower’s credit score. Another rule is regulating how much the monthly payment can be. The Consumer Financial Protection Bureau is limiting the monthly payment to be no more than forty-three percent of the borrower pre-tax income. This will help the consumer not have such a high payment every month that they cannot afford the other necessities that they need to purchase, or pay other bills that need paid. Upfront fees are to be limited now. No longer can banks charge fee after fee after fee. Now they are limited on what they can charge for fees so that the consumer is not overwhelmed with paying for fees when getting a loan. The Consumer Financial Protection Bureau is also eliminating interest-only payments. These types of payments can leave borrowers in much more debt. When the borrower is only paying on the interest, not the loan itself, they are not paying off the loan at all. Instead all the money goes to the interest, which will just come back as more interest that needs paid. It is… Read More