‘Responsible Lenders’ Fail at Basic Math

The Center for "Responsible‚" Lending have a new study that proves only one thing: in pursuit of their anti-credit crusade, CRL won't hesitate to manipulate data or accuse their competitors of racism. It should be no surprise though, as the North Carolina-based activist group, it has a long history of playing fast and loose with the truth.

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The fact is CRL's lobbying campaigns deceive and harm the consumers they claim to be helping. Study after study has found that banning payday loans forces consumers into costlier financial options like bounced checks, overdraft fees, and bankruptcy filings, costing them millions of dollars per year. Their latest report, titled "Predatory Profiling‚" claims that short-term lenders in California are preying on minorities by opening storefronts in ethnically diverse neighborhoods. Beyond the obvious fact that opening a store is very different than forcing someone to be a customer, CRL's study is so full of sloppy data and convenient "omissions" that it's impossible to take their conclusions seriously. In a study focused on race and ethnicity, CRL omitted any statistics about Asian Americans, despite the fact that they represent more than 13% of California's population. The study goes on to classify neighborhoods by African American and Latino concentration. But depending on each neighborhood's location, CRL's researchers applied wildly different criteria. A neighborhood with 13% African Americans could be ranked as either "Low" or "Medium-High" concentration. That kind of blatant inconsistency is hard to swallow, and any conclusions drawn from their data are about as relevant as, well, all their other reports. The report also estimated the average fee borrowers in California were charged even though the source material that they were using reported the actual fee! It should come as no shock that CRL's estimate was $8 per loan higher than the actual costs. This report repeatedly refers to "interest rates exceeding 400%," even though CRL's own statistics show that payday borrowers pay an average of less than 17% interest on their loans. Let's take a look at what CRL had to say about these fees a few years ago:

"In 2005, payday lenders made over $28 billion in loans and collected approximately $4.6 billion in fees from borrowers." [Center for Responsible Lending, Springing the Debt Trap]

Hmm, $4.6 billion in fees or interest on $28 billion in loans. Let's see... 4.6/28 = .164, or 16.4%. It's enough to make you wonder if these self-appointed "consumer advocates" have ever heard of a calculator!