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FTPLS Counters CRL Myth that Consumers Use APR to Choose Best Product
Payday Loan Advocacy group debunks myth that consumers use APR. Studies prove that consumers use a flat fee to choose credit products.
By: Fairness to Payday Lenders Society
The document perpetuates myths about payday loans. State lawmakers and even voters have embraced payday loans – selecting the option based upon the fee charged, not on Annual Percentage Rate.
Contrary to the CRL’s claims, the typical payday borrower is not in debt long term, nor caught in a cycle of back-to-back transactions that end up costing several times more in interest than the original amount they borrowed. Even though the federal Truth-in-Lending Act requires that the interest rate charged on any type of credit be stated as an effective annual interest rate - even if the loan does not last a full year - borrowers do not use APR to comparison shop. More than one independent study has conclusively proven that customers choose short-term credit products based on the flat fee charged, just as they compare the prices of any other product.
"Telling policy makers that APR is the method by which consumers choose credit product is just another tactic the CRL uses to mislead. The CRL is nothing more than a front for the Self-Help Credit Union, an institution that collected billions in overdraft fees from its customers, and which wants to do the same thing to payday loan customers by getting payday loans outlawed,” said Jackson Strain, spokesman for the FTPLS.
“APR is a measure of the time value of money. If the CRL insists on using APR for transactions, then it should be consistent. The cost of a taxi from Raleigh-Durham airport to the CRL’s offices is 192,720%, and a $100 room at a hotel is 36,500%. It's bad logic and simply a way to try to justify the kinds of lies the CRL has been repeatedly caught making.”
The CRL’s repeated use of misleading and inaccurate studies has been documented several times. Dr. Thomas Lehman, Associate Professor of Economics at Indiana Wesleyan University, debunked the CRL’s “Race Matters” as suffering from sampling and ideological bias as well as flawed in its regression analysis. Other academics have repeatedly pointed out the CRL’s “studies” on minority usage of loans in Los Angeles suffer the same problems.
"The CRL wants Congress to ban payday lenders," said Strain. "They are in direct competition with them, after all. And since the CRL insists on using a measuring system that customers never use, why not ask Congress to pass a law instituting the metric system?
The Fairness to Payday Lenders Society supports sensible consumer protection that allows consumers access to credit products they need, when they need them, without eliminating options. These lower-cost options are essential as we work to get our financial system and our economy back on track.
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The Fairness to Payday Lenders Society supports sensible consumer protection that allows consumers access to credit products they need, when they need them, without eliminating options.