Reality Check: American Banker Publishes Grossly Misleading Op-Ed by Payday Lending Group Honcho

March 9, 2018

Today, American Banker published a grossly misleading op-ed column by Dennis Shaul, the well-paid CEO of the payday lending industry’s special interest trade group, Community Financial Services Association of America (CFSA), which spends millions of dollars lobbying politicians each year to benefit predatory lenders. Previously, Shaul worked for the House Financial Services Committee before making a bee line to the revolving door for a job that pays him more than $500,000 a year to shill for an industry he once helped to oversee. The following is a reality check of Shaul’s American Banker op-ed column:

SHAUL’S CLAIM: The CFPB Has “Not Spent The Needed Time And Effort To Listen To Consumers’ Financial Needs and Realities” 

• “Unfortunately, Washington has failed these consumers. As certain policymakers in our nation’s capital seek to create new consumer protection regulations, they have not spent the needed time and effort to listen to consumers’ financial needs and realities. On the contrary, many of these regulations only serve to harm consumers’ financial freedom and well-being.” [Dennis Shaul, “BankThink CFPB should make sure payday rule reboot meets consumer needs,” American Banker, 03/08/18]

REALITY: The Majority of Payday Borrowers Feel Taken Advantage of and Want More Industry Regulation

• The Pew Charitable Trusts found that 55% of all payday borrowers feel that payday loans take advantage of borrowers and 72% of all payday borrowers favor more regulation of the payday industry. [“Payday Lending in America: How Borrowers Choose and Repay Payday Loans,” The Pew Charitable Trusts, February 2013]

REALITY: The Payday Industry Planned to Bombard the CFPB with Hundreds of Thousands of Comments to Bog Down the Agency and Delay the Payday Rule

• At its 2016 annual meeting, the Community Financial Services Association of America (CFSA) “plotted to bombard the” CFPB with “hundreds of thousands” of comments before the deadline on the payday rule. In March 2016, at the “annual meeting of the Community Financial Services Association of America (CFSA), the payday lending industry’s trade group,” “the industry plotted to bombard the Consumer Bureau with comments and studies suggesting regular people would be the real losers—even if their own oversized profits were obviously the focal point.” Payday industry “leaders stressed the need to deliver hundreds of thousands of such comments before the deadline on the payday rule, which is [October 7, 2016]. They suggested getting employees, landlords, suppliers, bankers, neighbors, state and local politicians, and even pastors to write letters.” Tony Dias of corporate defense firm Jones Day “asked lenders to ‘get every customer that comes into your store… to write out a handwritten letter and tell the bureau why they use the product, how they use the product, and why this will be a detriment to their financial stability.'” Dias said his office would “‘have a team of three full-time writers'” to assist them. [David Dayen, “How Predatory Payday Lenders Plot To Fight Government Regulation,” Vice News, 08/18/16]

• Shaul once said that one goal of getting customers to submit comments was to bog down the CFPB and delay the payday lending rule. Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), the payday lending industry’s trade group, said that, if the CFPB “has to wade through hundreds of thousands of comments—from homeowners to political officials and academics—to which they must respond, ‘then they are necessarily bogged down.'” He added, “‘If the rule is delayed, operators are still continuing to be in existence and presumptively to make a profit.'” [David Dayen, “How Predatory Payday Lenders Plot To Fight Government Regulation,” Vice News, 08/18/16]

SHAUL’S CLAIM: “Small-Dollar Loans Help…Americans…Bridge Financial Gaps”

• “One example is the Consumer Financial Protection Bureau’s rule on small-dollar lending, which was finalized in late 2017. This rule would restrict access to short-term, small-dollar loans, leaving millions of consumers without a source of credit during their most dire financial situations. Small-dollar loans help hardworking Americans manage unexpected expenses or bridge financial gaps, such as an auto repair, rent payment, or medical bills. Consumers value their access to these short-term credit sources, but they stand to lose it simply because Washington did not listen.” [Dennis Shaul, “BankThink CFPB should make sure payday rule reboot meets consumer needs,” American Banker, 03/08/18]

REALITY: Many Payday Borrowers End Up Using Other Options to Pay Off Their Loans

• The Pew Charitable Trusts found that borrowers “turn to the same options they could have used instead of payday loans to finally pay off the loans.” “Some borrowers ultimately turn to the same options they could have used instead of payday loans to finally pay off the loans. Forty-one percent need an outside cash infusion to eliminate payday loan debt– including getting help from friends or family, selling or pawning personal possessions, taking out another type of loan, or using a tax refund.” [“Pew Survey: Payday Loans Fail to Work As Advertised,” The Pew Charitable Trusts, 02/01/13]

REALITY: Payday Lenders Trap Borrowers in a High-Cost Cycle of Debt

• Payday loans are designed to keep borrowers in a cycle of debt that forces them to keep borrowing to pay back their loans and cover basic living expenses. “Payday lenders market their loans as a quick financial fix, but in reality they create a long-term cycle of debt and even worse problems, such as delayed medical care and bankruptcy. […] Payday lenders know that borrowers typically cannot repay the loan and cover their basic living expenses. Once the loan is paid back, payday lenders quickly lend them another. Payday lenders repeat this cycle over and over and over again. This is the payday loan debt trap.” [“Payday Loan Quick Facts: Debt Trap by Design,” Center for Responsible Lending, July 2014]

• Critics of payday lending argue “that borrowers often end up trapped in a cycle of high-cost debt as a result” of short-term loans. [Scott Horsley, “Payday Loans — And Endless Cycles Of Debt — Targeted By Federal Watchdog,” NPR, 03/26/15]

SHAUL’S CLAIM: There Was “Record Breaking” Consumer Opposition To The Payday Rule

• “While the CFPB claimed its rule was designed to protect consumers and serve their best financial interests, those who actually rely on the product overwhelmingly disagreed. In fact, opposition to the rule was record-breaking, with more than one million consumers speaking out against it. Many consumers who opposed the rule even took the time to send handwritten letters to the bureau recounting their personal stories of how small-dollar loans helped them in their times of need. Despite this massive outpouring of opposition, the agency ignored these individuals and instead imposed a regulation favored by partisan politicians and special interest groups.” [Dennis Shaul, “BankThink CFPB should make sure payday rule reboot meets consumer needs,” American Banker, 03/08/18]

REALITY: 40% of comments opposing the CFPB payday rule weren’t sent or authorized by the people associated with them

• A survey conducted by Mercury Analytics found that 40% of opposing the CFPB payday lending rule weren’t sent or authorized by the people who associated with them. “A survey conducted by Mercury Analytics for the Journal last year [in 2017] found that 40% of the comments in a batch of 13,000 comments opposing the CFPB rule weren’t actually sent or authorized by the people who associated with them.” [James V. Grimaldi, “Lawmaker Seeks Probe into Fake Comments on Payday-Lending Rule,” The Wall Street Journal, 02/05/18]

REALITY: Pro-Payday Consumer Testimonies Submitted to the CFPB Containing Identical Language Are Easily Found

• In a matter of minutes, Allied Progress found that hundreds of positive consumer testimonials about payday loans sent to the CFPB contained identical language. [“Group Alleges Cut-And-Paste Job In CFPB Comments Favorable To Payday Loans,” Morning Consult, 09/26/16]

REALITY: Payday Lending Used Misleading Rhetoric, Elements of Coercion, and “Scary Warnings” to Get Customers to Comment on Payday Lending Rules

• Payday lenders used “high-pitched rhetoric and scary warnings” in to mobilize customers to file comments opposing the CFPB’s payday rules. “With high-pitched rhetoric and scary warnings, the payday lending industry is attempting to mobilize its borrowers to flood the CFPB with comments opposing the agency’s efforts to issue rules regulating the industry. Individual payday lenders, such as Advance America, are providing Internet links to trade group websites that make the process of commenting as simple as… well, taking out a payday loan.” [David Baumann, “Payday Lenders Mobilize Consumers With Dire Warnings,” Credit Union Times, 09/05/16]

• Critics of the payday lending industry suggested “that the letter-writing involve[d] an element of coercion or pressure, directly or implied.” One consumer advocated “called it ‘disingenuous’ for the lenders to boast that the letters reflect the true opinions of the typical payday borrower.” “There’s nothing wrong with writing to the government, said David Rothstein, a former advocate for non-predatory resources at Neighborhood Housing Services of Greater Cleveland and now a principal at the Cities for Financial Empowerment Fund. That is, ‘as long as the customers and clients know what they’re writing about and what they’re asking for,’ he said. In this case, however, the payday lenders are ‘providing the pen and paper and, let’s not forget, providing the cash for the loan.’ This suggests that the letter-writing involves an element of coercion or pressure, directly or implied. Rothstein called it ‘disingenuous’ for the lenders to boast that the letters reflect the true opinions of the typical payday borrower.”[Stephen Koff, “Payday lenders get thousands of borrowers to complain to government about rules meant to protect them,” com, 08/22/16]