Kennesaw State Study on Payday Industry
Kennesaw State Study on Payday Industry
This week a study on the payday industry was released by Professor Jennifer L. Priestley at Kennesaw State University. This is exactly what we need more of – a close look at large amounts of actual data and statistics on use of payday loans and their array of impacts on consumers.
Opponents of the payday industry, with the help of the media, utilize emotional arguments and very small samples of information to cast a negative light on the industry and those who operate within it.
Let’s stick to the bottom line and the best way to get there is with numbers! See below for actual text from the PR Newswire Release from December 9th, 2014. Also, within the body of the article you will see the link to the actual paper itself.
KENNESAW, Ga., Dec. 9, 2014 /PRNewswire-USNewswire/ — A new study conducted by a Kennesaw State University professor casts doubt on the claims of payday loan critics that extended refinancing of these loans are harmful to consumers’ financial welfare.
The study, which was commissioned by the Consumer Credit Research Foundation and based on the transactions of 37,000 borrowers over a four-year period, also found that borrowers who live in states with fewer refinancing restrictions fare better than those in more heavily regulated states.
“We have, for the first time, actual scientific data on the outcomes from different rollover patterns to inform an important policy issue,” said Jennifer L. Priestley, professor of applied statistics and data science in Kennesaw State University’s College of Science and Mathematics, and author of the study. “Our research fills a gap in the science of how consumers respond to protracted use of payday loans. All prior regulatory interventions had been based on the presumption of harm, not actual evidence; and we now have real evidence that contradicts those views.”
Key findings from the report include:
• Borrowers who engaged in protracted refinancing (“rollover”) activity had better financial outcomes (measured by changes in credit scores) than consumers whose borrowing was limited to shorter periods.
• Borrowers experienced a net positive financial welfare impact when they faced fewer regulatory restrictions on rollovers. State-law limitations on rollovers appeared to contribute to adverse changes in credit scores for borrowers.
“This study contributes to a growing body of literature which shows that payday loans may not only fail to harm borrowers, but may actually contribute to an improvement in borrower welfare,” said Priestley. “The absence of adverse outcomes from protracted borrowing must be considered by regulators and policymakers as they mull restrictions on use of short-term credit. Further study of actual consumer outcomes is needed before the imposition of new regulatory rollover restrictions.”
Priestley is also the director of Kennesaw State’s Center for Statistics and Analytical Services, which was established in 2011. The Center provides analytical support to the university, business and government communities of Atlanta and North Georgia. Earlier this year, Kennesaw State was recognized for innovation and real-world use of expanding technology by the editors of ComputerWorld in its annual Data+ Editors’ Choice Awards.
Priestley holds a B.S. in Economics from Georgia Institute of Technology, an MBA from Pennsylvania State University, and a Ph.D. from Georgia State University. She has also held positions at MasterCard, VISA and Accenture.
To review the complete paper, visit: http://ssrn.com/abstract=2534628.
Kennesaw State University is the third-largest university in Georgia, offering 100 graduate and undergraduate degrees, including doctorates in education, business and nursing and a Ph.D. in international conflict management. A member of the University System of Georgia, Kennesaw State is a comprehensive, residential institution with a growing student population of nearly 26,000 from 130 countries.
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City Ordinance is shot down in Lubbock.
City Ordinance is shot down in Lubbock.
Some very positive news came out of Lubbock with the City Council voting down the “Payday Loan Ordinance” by a vote 5 to 2. Credit Access Business owners all across Texas were impressed by Lubbock’s push back of the liberal backed City Ordinance. Ordinances across Texas have shut down over 40% of Credit Access Businesses in the last several years.
Rates have increased as CABs have fought to survive the ordinances, access to credit for consumers who need it most has decreased. The ordinance issue just another reminder that liberals meddling with small businesses and the passage of more regulation ends up hurting the consumer they say they are trying to protect.
We have quite a lengthy set of rules and regulations that govern Credit Access Businesses in Texas. And, the Office of Consumer Credit Commissioner does an effective job at overseeing Credit Access Businesses. Let the conversation about “payday” stay at the Capitol and trust in the statewide legislative process.
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Improving your Third Party Lender Arrangement
Improving your Third Party Lender Arrangement
If you already are one, or if you are laying the groundwork for becoming a Credit Access Business in Texas, consider cementing your Third Party Lender component with more than a handshake. It goes without saying that we need to invest in proper consumer loan documentation and operating software. We should also do the same with our approach to the Third Party Lender relationship.
Now that the OCCC is closely examining many facets of the CAB as it operates, it is critical that you have a clear arrangement between your business and the Third Party Lender who issues loans through your CAB location.
Do you know that many CAB’s have written contracts which serve as the operating policy between them and the Third Party Lender? It is important that the CAB invests in this written company policy, and that it can be produced upon request. Do what you can to have a well rounded agreement in place as means to demonstrate your commitment to operating lawfully and fairly. Gain confidence in your readiness for an OCCC examination. Operating reports that echo your Third Party Lender Agreement are an intelligent addition to a well designed arrangement. CAB Consulting and Brokerage is working with licensed Credit Access Businesses and Third Party Lenders in Texas in these matters.
We can assist you in a review and improvement of your Third Party Lender arrangement. Feel free to contact Michael Brown at CAB Consulting and Brokerage at 214-293-8676 or cabconbrokerage@gmail.com to learn more.
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May 10, 2017 at 6:38 pm
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I am a chief general counsel (both contract and salaried) for a CAB operating in Texas. I am considering, and the CAB is willing if it is done correctly, to also be a lender to the CAB. Do you know any regulations, I cant seem to find any, that discuss what the nature of the relationship can not have as far as being independent. No authority on decision in business control matters….no authority on decision in who gets loans and who does not. Seems to me a properly drafted agreement would make all concerns disappear
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House Bill 786
House Bill 786
This bill was written by Rodriguez. It is the opinion of CAB Consulting that this bill addresses Credit Access Businesses operators who were allegedly providing services without holding a post check, or without a vehicle title. The operators in question may have intentionally forfeited their CAB licenses and just operated as a CSO’s, which was a method employed to adapt to local ordinances. Local ordinances were put into place to regulate and restrict “Credit Access Businesses,” not “CSO’s” who weren’t holding post-dated checks or filing liens on auto title loans they brokered. The bill makes revisions to existing rules and statutes, and edits-down the definitions of key terms like deferred presentment and motor vehicle title loans. By doing so the bill would theoretically prohibit operators (CSO’s and/or CAB’s) from this continuing this practice. Simply put, simplifying the definitions and rules gives the law broader applicability.
The OCCC issued an advisory bulletin on this subject recently and noted that the legislature would likely look into this matter. HB 786 also gets into some requirements about CAB contracts, they would need to say “no prepayment penalty”, must “comply with FDCPA,” “may not threaten or pursue criminal action,” must comply with Military Lending Act, 10 USC 987,” etc. Also, the third party lender must be disclosed, along with their interest charged, the CAB fees charged, etc.
There are some revisions to the Texas Finance Code Chapter 393.221 definitions, lines are drawn through certain phrases within the definitions on deferred presentment and auto title loans. Appears to address the work arounds mentioned above. The bill goes on to require CSO’s to get a CAB license if they are going to perform services detailed & defined in this bill under the modified definitions. Additional attention is given to other issues on disclosures and reporting, no new topics there.
Click here for House Bill 786! HB.786
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