The CFPB’s white paper on payday and deposit advance loans received well-deserved criticism in a letter to Director Cordray from the Community Financial Services Association of America (CFSA), a national trade organization for payday lenders.  

The CFSA’s letter characterizes the paper’s data as “demonstrably incomplete and misleading” and indicates that the paper’s “tone, conclusions, and specific language [seem] aligned with the type of rhetoric that more often comes from advocacy groups that are not always driven by facts, but rather are driven by agendas and unsupported, anecdotal information.” 

The letter comments that, by excluding from its discussion of usage payday customers who elect to use the payday advance one time, the paper “paints an incomplete and inaccurate picture of the product, its use and the consumer’s experience.”  The CFSA also comments on the absence of “vital real world context” from the report, observing that the paper “does not consider the totality of the short-term credit marketplace, including the many available options that consumers consider and choose not to employ.”  Most significantly, the CFSA states: 

The Bureau cannot draw any meaningful conclusions to inform policy until it follows up this preliminary review with the difficult work of understanding the choices and consequences faced by those in need of short-term credit and the risks of driving people to higher-cost products, expensive penalties or less-regulated providers.  In short, it is irresponsible and arbitrary to look at payday lending and deposit advances in a vacuum, as the Bureau has done in this report. 

We have expressed similar concerns about the white paper’s failure to address the very real benefits of payday loans or the question whether (and when) such benefits outweigh the costs. 

As it continues to look at the short-term credit marketplace, we hope the CFPB will engage in the thorough analysis urged by the CFSA and attempt to address the shortcomings in its white paper that the CFSA has identified.