Cash USA: Big Banks Lend Over $1.5 Billion to Payday Lenders

MADISON, Wis., Sept. 21 /PRNewswire/ -- A recent "report" from the National People's Action (NPA) and the Public Accountability Initiative titled "The Predator's Creditors" has sparked a series of protests at local bank branches, as well as responses from various sources, including responses from several  payday lending organizations, including direct online payday lender Cash USA and Payday Loan Trust.

The report, which goes as far as including an image of three sharks on the cover (an obvious reference to loan "sharks," which opponents of payday lenders often refer to lenders as), reportedly calls on Wells Fargo, JP Morgan-Chase, and Bank of America to stop lending to those in the Payday Lending Industry.  

According to the Center for Responsible Lending (CRL), only low-income families with lack of credit options tend to take payday loans. It does not explore the reasons why the demand for short-term credit exists in these areas or the effects that banning payday lenders has had in communities that have already shut down these types of lenders.  Now that the report has gained significant attention from the media, and sparked local protests at several cash advance stores and banks, the NPA has pulled the report from their website.  

Those willing to look beyond their own pre-conceived notions and opinions of the often attacked Payday lending industry are usually surprised when faced with un-biased, independent research and the subsequent statistics regarding payday loans themselves, and how households will fare in the future, once payday loans have been banned.

One example is the statement released by the government contractor Veritec (a contractor that assists with program management to the state regulators of payday lending), rebutting the "statistics" released by the CRL regarding typical payback.  It stated that the figures are based on false assumptions that the borrower will extend the loan several times over (not allowed in most states at this time).

A New York Federal Reserve Staff Report actually studies the economic impact of banning payday loans, by researching statistics from Georgia and North Carolina since they banned payday lending.  The report directly points out several inconsistencies and misleading statistics from the highly publicized CRL reports, which describe payday lenders as "predatory" lenders.

Not surprisingly, nearly every report that condemns payday lending from these so-called "consumer advocate" groups hides an organization that stands to benefit from limiting consumer credit options in that particular state/locality.  A good example is the case of Martin Eakes and Self-Help, who helped ban payday lending in North Carolina.  Since banning payday lending in North Carolina, Self-Help's assets have increased from $114 million to $292 million from 2003-2007.  Many media outlets have criticized Mr. Eakes for conflict of interest regarding policies and his leadership of credit unions.

Activists protest local banks in an attempt to hurt the payday lending industry by cutting off their financing, however many of them do not realize the facts.  Although some large payday lenders have the benefit of financing business growth from big banks, most lenders are small business owners funding their own growth.  Studies have found that by limiting credit options, rather than simply regulating them, consumers are unknowingly harming the future of their state and local economies.

SOURCE Cash USA