Reality Check: Pro-Industry Think Tank Claims Obama Administration “Jihad” Against Payday Lenders
RHETORIC: Payday Lenders “Charge What They Must in Order to Make a Profit”
“Lenders charge what they must in order to make a profit in an industry with a clientele at higher risk of defaulting than typical bank borrowers, while the competition prevents them from charging much more than the costs of any such losses and overhead.” [Quad City Times: Andrew Quinlan Op-Ed, “CFPB Shouldn’t Destroy Small Loans Industry,” 2/10/16]
REALITY: Payday Lenders Recently Reported Raking in Massive Profits, Rewarding Shareholders with Huge Dividends and Share Repurchases
- First Cash Financial Reported That They Made $132 Million in FY2015. “Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain non-recurring charges) for fiscal 2015 totaled $132.2 million, which equaled the prior year adjusted EBITDA on a constant currency basis. Net income was $60.7 million for fiscal 2015. A reconciliation of adjusted EBITDA to net income is provided elsewhere in this release.” [First Cash Financial Press Release, 1/28/16]
- First Cash Financial Initiated A 50 Cent Per Share Dividend. “The Board of Directors has approved the initiation of a cash dividend payment at an annual rate of $0.50 per share to be paid out quarterly.” [First Cash Financial Press Release, 1/28/16]
- Cash America Reported That They Made Over $113 Million in FY2015. Cash America reported that their adjusted EBITDA for 2015 was $113,392,000. [Cash America Press Release, 1/28/16]
- Cash America Has Repurchased Over 4 Million Shares at an Average Price of $25.87 As of The End of 2015. “On October 29, 2015, the Company announced that its Board of Directors approved a three million share repurchase authorization to commence at the conclusion of an existing four million share repurchase authorization that was approved in January 2015. The Company began repurchasing shares in the open market under the October 2015 repurchase authorization in December 2015. Under these share repurchase authorizations, the Company repurchased 757,700 shares during the fourth quarter of 2015. These repurchased shares represented approximately 2.8% of the diluted shares as of the end of the third quarter of 2015. Through the year ended December31, 2015, the Company repurchased 4,015,866 shares at an average price of $25.87 per share under the repurchase authorizations representing approximately 13.7% of the diluted shares as of December 31, 2014. The Company ended the fourth quarter with $23.2 million in cash and $252.9 million available under its $280 million line of credit.” [Cash America Press Release, 1/28/16]
- Cash America Increased Their Dividend by 60%. “In a separate release today, the Company announced that its Board of Directors, at a regularly scheduled quarterly meeting, increased the Company’s cash dividend amount to $0.08 (8 cents) per share on common stock outstanding. The newly declared dividend represents a 60% increase in the Company’s previous quarterly dividend of $0.05 (5 cents) per share. The dividend will be paid at the close of business on February 24, 2016, to shareholders of record on February 10, 2016.” [Cash America Press Release, 1/28/16]
- World Acceptance Corporation Reported Making Over $91 Million from April 1, 2015 To December 31, 2015. World Acceptance Corporation reported income before taxes of $91,632,000 for the nine months ended December 31st, 2015. [World Acceptance Corporation Press Release, 1/28/16]
- World Acceptance Corporation Repurchased 1.4 Million Shares in 2015. “The Company did not repurchase any shares in the third quarter of fiscal 2016. However, the Company benefited from the 1.4 million shares repurchased during fiscal 2015. The prior year repurchases resulted in a reduction in the Company’s weighted average diluted shares outstanding of 7.5% when comparing the two nine month periods. Excluding unvested restricted shares, there were 8.7 million shares outstanding as of December 31, 2015.” [World Acceptance Corporation Press Release, 1/28/16]
RHETORIC: Obama Administration Has “Jihad” Against Industry, Borrowers Love Payday Loans, Don’t Want Reforms
“Tellingly, the administration’s jihad is not matched by public outcry. Only 2 percent of the more than 250,000 complaints the CFPB logged in 2014 were about payday loans. For the millions of Americans who occasionally find themselves in need of a cash infusion to cover unexpected costs like medical bills, but who lack access to other forms of credit, the new rules will prove punishing.” [Quad City Times: Andrew Quinlan Op-Ed, “CFPB Shouldn’t Destroy Small Loans Industry,” 2/10/16]
REALITY: Study Shows That Majority of Payday Loan Consumers Feel Taken Advantage of by Payday Lenders and Nearly 3/4s of Borrowers Support More Regulation of the Industry
- 55% Of Payday Loan Consumers Feel Payday Loans Take Advantage of Borrowers. [Pew Charitable Trust: “How Borrowers Choose and Repay Payday Loans,” 2/2013]
- 72% Of Payday Borrowers Favor More Regulation of the Industry. [Pew Charitable Trust: “How Borrowers Choose and Repay Payday Loans,” 2/2013]
RHETORIC: CFPB is Fixated on Destroying Payday Industry, Not Preventing Fraud
“The [CFPB] has been unusually fixated on the industry, going far beyond sensible efforts to prevent fraud and targeting it instead for outright destruction. It’s a sentiment that seems to permeate the Obama administration, as congressional investigations into Operation Choke Point — where banks were pressured to drop clients in politically disfavored but otherwise lawful industries — uncovered emails from senior FDIC officials acknowledging they “literally cannot stand payday.” [Quad City Times: Andrew Quinlan Op-Ed, “CFPB Shouldn’t Destroy Small Loans Industry,” 2/10/16]
REALITY: Operation Choke Point Is Only Targeting Merchants Who Are Violating the Law by Defrauding Consumers
- FDIC: “Those That Are Operating with The Appropriate Systems and Controls Will Not Be Criticized for Providing Payment Processing Services to Businesses Operating in Compliance with Applicable Law.” “A Federal Deposit Insurance Corp. advisory warning banks to be vigilant about processing payments for fraudulent merchants has been revised after an outcry by Republican lawmakers that it targeted legitimate businesses. The U.S. regulator said it eliminated from the advisory a list of examples of risky merchant categories that “led to misunderstandings” about how it’s supervising banks’ ties to third-party payment providers. The agency said in a statement today that it never meant to ban banks from doing business with the types of merchants on its list. “Those that are operating with the appropriate systems and controls will not be criticized for providing payment processing services to businesses operating in compliance with applicable law,” the agency said in its updated industry guidelines, revising a document issued in September.” [Bloomberg, “High-Risk Merchants List Dropped by FDIC After Complaints,” 7/28/14]
- FDIC General Counsel: Banks and Third Party Payment Processors Obeying the Law “Have Nothing to Be Concerned About.” “Richard J. Osterman Jr., the FDIC’s acting general counsel, said in a July 15 hearing that the list was meant to instruct banks on where to focus their due diligence. He said that banks and third-party payment processors obeying the law “have nothing to be concerned about.” [Bloomberg, “High-Risk Merchants List Dropped by FDIC After Complaints,” 7/28/14]
- Assistant Attorney General of DOJ Civil Division: DOJ “Policy Is to Investigate Specific Unlawful Conduct Based On Evidence That Consumers Are Being Defrauded, not to Target Whole Industries or Businesses Acting Lawfully.” “Stuart Delery, assistant attorney general for the Justice Department’s civil division, told lawmakers that the department’s “policy is to investigate specific unlawful conduct based on evidence that consumers are being defrauded, not to target whole industries or businesses acting lawfully.” [Washington Post, “Republicans to Justice Dept.: Stop targeting legal businesses in ‘Operation Choke Point’,” 7/18/14]
REALITY: Any Terminations of Payday Lender Accounts by Banks Have Been Business Decisions Made by Banks, Not Regulators
- FDIC, Office of The Comptroller of Currency and Federal Reserve: Any Guidance the Agencies Provide to Banks Is Non-Binding and Banks Have Made the Decision to Terminate Ties to Payday Lenders. “Federal banking regulators are seeking the dismissal of a lawsuit filed by payday lenders that claim to be victims of Operation Choke Point. The suit accuses the banking agencies of privately pressuring banks to sever their relationships with lawfully operating payday lenders. But in court documents filed Monday, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve Board said that banks are free to make their own decisions about customer relationships, and that guidance the agencies provide to banks is not binding. Referring to banks that have cut ties with payday lenders, lawyers for the FDIC wrote: ‘Any such termination decisions were the banks’ business decision.’” [American Banker, “Bank Regulators Ask Judge to Dismiss ‘Choke Point’,” 8/20/14]