Could Payday Loans Be Banned? Amscot takes no risk
On Friday, the public was expected to weigh in on the payday lending industry before federal regulators choose terms businesses can – and cannot – offer to millions of low-income borrowers across the country.
The issue is of vital interest to Florida’s largest payday lender, Tampa-based Amscot. The company warned that federal regulations, as currently proposed, would bankrupt it. The privately held Amscot employs approximately 1,850 people and has annual sales of over $ 200 million.
Over the past several months, the company has asked its customers to contribute to the public comments, including their name and address, which Amscot has posted in Washington, DC. About 560,000 Amscot customers have done so, the company said. The majority of customers chose to sign one of the five pre-printed forms prepared by Amscot. One of the letters said in part, “Without this provider in my community, I know my family will suffer.
Industry representatives have estimated that around 1.5 million comments have been submitted to the US Consumer Financial Protection Bureau, which is responsible for implementing the new regulations.
“There has been tremendous interest in this rule-making,” said Alex Horowitz, senior executive of the Pew Charitable Trusts Small Dollar Lending Project. “It shows that this is high-stakes regulation… It could save low-income households over $ 10 billion a year.”
Horowitz and Amscot expect the CFPB to take about a year before the new regulations are imposed.
Payday loans are marketed to nearly half of Americans who don’t have the cash to cover an unexpected $ 400 bill.
Amscot invited this week a Tampa Bay Times reporter to review 102,458 manuscript customer comments, which were divided into stacks of thousands of pages high.
“I am on disability and unfortunately my monthly check does not cover my monthly expenses. I am actually relying on the cash advance to survive,” wrote a client from Tampa. The company asked the Times not to publish the names or addresses of those who wrote the comments. the Times compared a handful of names to public folder data and found matches.
“If you change the cash advance program, you will put more stress on working families (sic) from paycheck to paycheck,” wrote a client from St. Petersburg.
The CFPB in June proposed new regulations to “end payday debt traps” by capping the number and amount of loans businesses would be allowed to provide to customers.
Opponents of payday loans want to get rid of triple-digit interest rates and other practices that they believe victimize the poor.
But even opponents recognize that the working poor have few options outside the payday lending industry. The Pew Charitable Trust encouraged the CFPB to pass regulations that would make it easier for banks and credit unions to offer small dollar loans at a lower cost to consumers.
The Florida Office of Financial Regulation sets a maximum fee of $ 10 per $ 100 borrowed over 31 days. The loans also have a one-time verification fee of up to $ 5. Amscot’s total charge is $ 11 per $ 100. Florida also imposes a limit of $ 500 on loans and limits borrowers to one at a time.
In order to qualify for the loans, clients must have proof of income and a checking account.
Amscot said the letters would be used in a lawsuit against the CFPB if the final regulations threatened the company.
Comments to CFPB can be submitted to regulations.gov.
Times principal researcher John Martin contributed to this report. Contact Alli Knothe at [email protected] Follow @KnotheA.