Center For Responsible Lending Burning, Payday Loans Unscathed

The CRL is burning…

With each passing day, payday loans become more popular with consumers in need of a temporary cash bump. And with each passing day, the flames surrounding the Center for Responsible Lending (CRL) grow higher. Witness this recent story from the Credit Union Times‘ David Morrison. He reports in “Sandler Mortgage Lending Controversy Touches CRL” that the CRL is reeling from its association with Herbert Sandler’s subprime mortgage lending mess AND Martin Eakes and Self-Help Credit Union.

The New York Times turned up the heat in a recent piece on the Sandler’s that looked at the roots of America’s current financial crisis. The adjustable rate mortgages the Sandler’s offered definitely played a key role because borrowers were allowed to make payments that didn’t even cover interest. The Sandler’s called this “Pick-A-Pay,” which they offered through World Savings Bank. Once mortgage lending standards went slack, the writing was on the wall.

And that’s where the CRL made its money

Herbert Sandler once sat on the board of the CRL. The National Review reports that Sandler gave the CRL $20 million during mid-2007. Moreover, Sandler is a supporter of Marvin Eakes and Self-Help Credit Union, which fought hard to steal business from no fax payday loan companies via legal sanctions.

There has been speculation that Eakes was previously opposed to the controversial prepayment penalties written into mortgage contracts, but that Herb Sandler changed his mind. Did Sandler ply Mr. Eakes with cash? Whatever the case, critics say these penalties play no small role in keeping consumers trapped in debt. Let it be known, if you didn’t already know, that payday loans do not resemble this deadly weapon in any way, shape or form.

Not surprisingly, CRL spokespeople claim that they’ve been against prepayment penalties all along, but that they have “limited their opposition somewhat, as part of a compromise toward legislation mandating tougher public policy on prepayment penalties on subprime loans.”

Doubletalk, you say!

The CRL is planning to get tough on prepayment lending in subprime loans. Yet planning isn’t executing. Even though subprime loans made up a relatively small percentage of the mortgage loan diaspora, the penalties (and default rates) they carried were massive by comparison with the conventional majority. Sandler did not offer the Credit Union Times comment on the controversy.

There are a number of things about this situation that are truly extraordinary. Regarding payday loans, the Center For Responsible Lending has a lot of gall pointing the finger at these lenders as the culprit for consumer ruin when their own board members are deeply involved in one of the shadiest dealings with consumers in American history. There is massive traction in the arguments against them. May they go down in flames and move on to more honest employment. They could work in payday loan stores, for instance…