The burden of proof in his accusations against payday loans has become too much for Richard Eskow to bear. (Photo: Flickr)

This continues an exploration of Richard Eskow’s Huffington Post article “Usurious Payday Loans: Myths, Flawed Studies, and Solutions.”  If you missed part one of this article, Richard Eskow and the Burden of Proof, CLICK HERE.

Richard Eskow: Do payday loans exploit ‘at-risk’ groups?

Richard Eskow attacks an Elliehausen study regarding whether payday loans target “at risk” people, but he does so by simply stating that Elliehausen has published papers that support the payday loans industry. Then he cites papers from the other side that say otherwise. The sample group for Elliehausen’s study is derided by Eskow for being voluntary rather than random, and Eskow claims that there could be sample bias. Further exploration as to the motivations of the sample group for participating would be needed before Eskow could prove that Elliehausen’s study was tainted. As it stands, this becomes a “he said, she said” situation, hardly proof of his side’s superiority. Again, the burden of proof rests upon the shoulders of the accuser. And Richard Eskow isn’t making any headway. Nothing he says disproves these findings by Elliehausen (as cited previously in this very blog):

• 63 percent of customers are the heads of young families.
• Only 10 percent are 65 or older, indicating that the elderly are not being exploited or targeted as most critics claim.
• Customers typically have “lower and middle incomes”; 41 percent earn $25,000 to $50,000 per year, while 39 percent earn $40,000 or more.
• Higher income payday loan customers (those who earn more than $50,000) make up a larger share than those in the lower bracket ($15,000 or less). This refutes the idea that the poor and destitute are being “targeted.”
• 90 percent of customers have a high school diploma or better, while 54 percent have attended college or have a higher education degree.
• General indications are that payday loan customers have limited access to credit, yet still use payday loans sparingly.
• A whopping “81 percent of customers recalled receiving information on the annual percentage rate for their loan” and were aware of overall costs.
• Even more telling, 86 percent of no fax payday loan customers said that the product was a “useful service.”

For good measure, here are some other academic studies that show how payday loans benefit consumers. Mr. Eskow, satisfy the burden of proof. That’s the way it works in America.

Payday loans have appeared because there is demand

The sensationalist argument that payday loans stores have sprouted faster than fast food restaurants since 1990 is all flash and no substance. The growth has little to do with some diabolical plot and everything to do with filling a need. Banks refuse to lend to consumers who do not meet their credit requirements. Payday loans fill the gap for customers who need short-term credit (such as to pay a utility bill to avoid shutoff, or to repair a commuter car and make it to work) and can get said credit in no other place. It’s a means to an end that 94 percent of its customers use in a responsible fashion – 94 percent do not roll over loans, according to long-existent industry materials (such as those of Advance America, Form 10-K, which Meyers suggests that Eskow read).

(Photo Credit: http://www.flickr.com/photos/22280677@N07/ / CC BY-ND 2.0)

The burden of proof can be a mighty weight, can't it, Mr. Eskow? (Photo: Flickr)

Richard Eskow, a private-sector consultant who works for corporations and organizations that include the World Bank, is rather miffed about what Lawrence Meyers had to say regarding Eskow’s anti-payday loans argument. While Meyers is something less than professional in the manner in which he addresses Eskow (referring to him as a “simple child”), the exchange does raise some very real questions about some of the claims Mr. Eskow makes in his recent Huffington Post article “Usurious Payday Loans: Myths, Flawed Studies, and Solutions.” Much of Eskow’s criticism of the payday loans industry seems to center on how the industry allegedly targets and exploits the poor and minorities. As we’ll see, however, one who lives in a glass house should not throw stones.

Richard Eskow and the World Bank

Keep this in mind: Richard Eskow is closely allied with the World Bank. And according to the World Bank’s Articles of Agreement, its aim is to “assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes.” Yet, as the Bretton Woods Project, the World Bank imposes conditions on countries that borrow based on what is called the “Washington Consensus,” as opposed to the specific needs of the borrowing country.

Loans originated by the World Bank have been criticized for being rather unethical; for instance, Bretton Woods cites an example in which hydroelectric dams were funded and constructed even though doing so displaced indigenous people who lived in the area. Partnering with the private sector, as the World Bank does, has also raised concerns of undermining the role of individual states to provide essential goods and services, which Bretton Woods claims has caused shortages of such services in “countries badly in need of them.”

This is what Richard Eskow supports?

It’s strange that Eskow supports this, because by the end of his Huffington Post rant, he seems to think it’s actually a good idea to allow states to make their own decisions regarding payday loans. But only moments before, he proposes that Congress form its own agency to regulate payday loans out of business.  It seems there’s some conflict in Eskow’s mindset over payday loans and other financial matters, if not out-and-out hypocrisy. However, let’s view the meat of his argument against payday loans, which is of primary interest.

Payday loans ‘exploit helpless people,’ claims Eskow

This is an argument that the pro-big bank establishment has used for years. Those with a religious bent go so far as to connect payday loans with usury, which is far from correct. Usury amounts to excessive and unlawful charging of interest. Payday loans do not qualify on either of those counts, and hence do not connect so neatly to Eskow’s concept of usury. Eskow cites anti-payday loans studies funded by such anti-payday loans industry groups as the Center for Responsible Lending as support for his arguments. He also pokes at pro-payday loans studies by saying that they’re often funded (at least in part) by pro-payday loans groups.

At worst, these two things could cancel each other out. That would still leave Eskow on the grounds of the legal logic where the burden of proof rests upon the accuser. But the Center for Responsible Lending was founded by Herb and Marion Sandler (mavens of the subprime mortgage crisis) and is backed by Martin Eakes of Self-Help Credit Union/Self-Help Inc. A great deal of doubt exists as to whether any of those sources are reputable when it comes to financial responsibility. Thus, Eskow’s anti-payday loans material could easily be viewed as the weaker of the two sides.

READ ON to see whether Eskow is right in claiming that payday loans exploit the powerless…

(Photo Credit: http://www.flickr.com/photos/lightmatter/ / CC BY 2.0)