Editor's note: The following letter to the editor was originally posted as a comment to our April 3, 2015 letter to the editor, "CFPB Misguided on Payday Loans" by Marvin Umholtz.
Mr. Umholtz writes, "The CFPB's activist-driven 'intended consequences' will make it impossible for any service provider to operate in the payday lending space."
It's a certainty that, if implemented as proposed by the CFPB, the payday loan product landscape will be altered dramatically. Only the large, well-financed, data-driven, Internet lenders will survive. The local payday loan and complementary small dollar credit locations employing thousands of workers and indirectly their local community brethren will close. The commercial buildings – which are "exceeding the number of McDonald's locations," as is so often quoted by the media – will shutter. And most importantly, the Walmart customer demographic who want, need and choose to use payday loan-styled small dollar credit loan products will have nowhere to go.
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The CFPB clearly acknowledged that their contemplated restrictions would lead to a "substantial reduction" in volume and a "substantial impact" on revenue. Further, the CFPB predicted that lenders "may change the range of products they offer, may consolidate locations or may cease operations entirely." According to CFPB calculations, the proposed rules for short-term "covered loans" would produce: First, a volume decline of 69% to 84% for lenders choosing the Ability to Repay (ATR) option, and second, a volume decline of 55% to 62% (with even greater revenue declines), for lenders using the alternative option. The CFPB concludes, "The proposals under consideration could, therefore, lead to substantial consolidation in the short-term payday and vehicle title lending market."
What does the CFPB care? They have their government jobs.
Jer Trihouse
Founder
Trihouse Small Dollar Loan Consultants
Newport Beach, Calif.
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