CFPB Compelled to Disclose that the Majority of Payday Loan Consumer Testimonies are Positive
The Community Financial Services Association of America, or CFSA, which is an organization that represents the short-term loan industry, issued a statement claiming that the CFPB suppressed positive consumer testimonials about the short-term loan industry. The CFSA used the Freedom of Information Act to request documents proving that of the 12,546 testimonials sent to the CFPB’s “Tell Your Story” consumer platform over a five-year period, 12,308 shared positive opinions about the industry.
The group released a statement that said, “These positive consumer stories, which comprise 98 percent of the payday loan-related submissions, have never been made public before. Instead, the Bureau buried and ignored these real-life customer stories as it marched forward with proposed rules that would restrict access to credit for millions of Americans.”
Consumer Complaints about Payday Loans
The Morning Consult stated that the allegations concerning the CFPB’s comment suppression comes at a time when the agency is getting feedback about its proposed regulations for short-term loans. A recent annual agency report shows that the CFPB handled approximately 5,500 complaints regarding payday loans last year. According to the CFSA, out of 240 comments that were portrayed as negative in the “Tell Your Story” consumer portal, 84 of them were incorrectly labeled as relating to short-term loans while 74 of them referenced scams or unregulated lenders.
The CFSA says that the government agency has failed to address the issue of ignoring the positive consumer comments. Dennis Shaul, the chief executive of the CFSA said, “The Bureau is pursuing its ideological crusade against the regulated short-term lending industry with its proposed rules while it ignores the positive experiences shared by consumers.”
Digging into the Top Consumer Complaints
Over the last two and a half years, consumers submitted about 10,000 complaints to the CFPB. Komo News published a report confirming that the top consumer complaints against the payday loan industry included excessive interest rates, illegal threats, unjust debt collection, unexpected fees and the unlawful sharing of personal information.
Many of the negative complaints are against companies that are not properly licensed. This includes storefront and online lenders. In addition, a number of the complaints involve payday companies that the State Department of Financial Institutions investigated. If consumers discover that a lender is being investigated, they are more likely to file a complaint if they’ve borrowed money from them.
What is the Impact of Payday Loans?
Researchers are largely split when it comes to the impact of payday loans on the nation’s citizens. According to a 2016 study, payday loans give families support when catastrophic moments arise. For instance, when natural disasters happen, parents may need help keeping their kids fed and mortgages paid, but this is a temporary situation, so once the calamity has passed, they’re able to repay the loan and move forward. While this is a good thing, research has also determined that access to short-term credit decreases a community’s overall wellbeing. It does this by encouraging residents to overconsume and spend less on necessities like food and rent.
When people have access to payday loans, they may fall behind on their other financial obligations because they’re trying to pay off the short-term loan. Also, statistics show that payday lenders gravitate to neighborhoods with high poverty rates and larger minority populations, which supports accusations that short-term lenders target the vulnerable.
How Can Millions of Satisfied Customers Be Wrong?
With the CFPB being forced to reveal that the majority of payday loan consumer testimonies hold the industry in a positive light, it’s clear that people appreciate having access to short-term loans. It is also obvious that those who do the actual borrowing from short-term loan lenders are satisfied with the services and products offered by the industry. They do not want the government to interfere with a credit option that they value. To learn more about the CFPB’s decision to ignore consumer feedback, visit the Personal Money Store.