- The Washington Times - Monday, August 31, 2015

“Welcome to the store, Candace, what can we do for you today?” Elvis Murphy, a center manager for ACE Cash Express in Alexandria, Virginia, asked warmly as Candace Durvy approached the counter.

Ms. Durvy, 27, had come to the payday lender to ask for an extension on her $500 cash advance, which was due in a few days. Mr. Murphy and Ms. Durvy spoke in tones of familiarity, as Mr. Murphy explained her options. They agreed on a five-day extension so she could receive her next paycheck before having to pay off her loan.

“I don’t do this often,” Ms. Durvy explained to The Washington Times. “But it’s back-to-school time, and those expenses add up. My kids need school supplies.”

Ms. Durvy had taken out a $500 loan, the most common request at the Alexandria shop and the maximum amount one can borrow per Virginia law, agreeing to pay the store $118.80 in interest, or about 24 percent of the original loan.

“I realize some may think that’s expensive, but it’s a good option for me,” Ms. Durvy said. “Everybody in my family comes to me asking for money, and I would never want to go to them to ask for some extra cash for the kids. My mom just retired, and I don’t want to put that burden on her.”

Ms. Durvy, who supports three children ages 7, 4 and 15 months, knows her options. She works as a business administrator at the Andrews Federal Credit Union in Prince George’s County. She said her bank wouldn’t lend such a small amount in a short period, and she didn’t want to have to take out a larger loan.

“Yeah, the interest rate is so high, but I’d rather pay it and get the loan and be done with it,” Ms. Durvy said.

Once a borrower is cleared through ACE’s database — providing the lender with a valid state-issued ID, a recent pay stub, a bank statement and a preprinted check so the lender can determine the borrower’s ability to pay back the loan — the borrower can walk out of the shop with $500 in hand.

The Consumer Financial Protection Bureau has taken aim at these sorts of loans, arguing that payday customers often get trapped in vicious “debt cycles” and are unable to ever pay back the principle and interest on their loans without having to take out new ones.

Consumers oppose regulations

In March, the federal agency proposed rules to rein in the industry — rules the industry says will put 70 percent of payday lenders out of business and take credit options away from people like Ms. Durvy.

More than two-thirds of payday loan users, or 69 percent, oppose government restrictions on the loans, according to a March survey conducted by KRC Research. Ms. Durvy counts herself among them.

Although Ms. Durvy takes out only a few payday loans a year, it is clear she is just getting by, needing to wait for her next paycheck to pay off the loan in full. Ms. Durvy said she could have paid off the loan at the time she requested the extension, but the comfort of an additional paycheck would lessen the financial blow.

Maria, a retired schoolteacher who refrained from giving her last name to The Times, was another customer at the ACE shop in Alexandria. She is financially surviving on her school pension and Social Security, and the payday loan helps her get by, she said.

“I love this shop, I love Elvis, I’ve had a wonderful experience,” Maria said in an interview, likening her payday experience to a small community bank whose tellers know about her life and struggles and seem to care.

Asked whether payday was a good option, given its high interest rates and threat of a debt cycle, Maria was undeterred.

“I’m a single, retired person,” she said. “I come here from time to time to make ends meet, to pay the bills.”

‘Too proud to beg’

Of the dozen payday customers interviewed for this article, ranging from Virginia to Florida to Illinois, all acknowledged the high interest rates they were paying for small loans, but said asking a family member, church or charity for help with their bills wasn’t an option. They were all “too proud to beg,” as one borrower said.

“The way lenders have tightened their belt, there really are no personal loans anymore,” said Phyllis, who wanted to keep her last name confidential.

Driving in her Ford Mustang in St. Petersburg, Florida, she hit a piece of road debris, which ripped out her brake lines and damaged her tires.

“I went to Wells Fargo and asked them for a loan, and they said it would be 14 days. Well, I need to go to work, I needed the money before then, so I went to a payday lender and took out $500 so I could get my car fixed,” she said.

Phyllis went to Amscot Cash Advance in St. Petersburg and paid about $51 interest on her $500 loan, she said.

“I didn’t consider it extreme. I needed the money at the time,” she said, and asking family for a loan wasn’t an option.

“I withdrew from a lot of family,” Phyllis said. “I just wanted to deal with this myself.”

Some payday customers interviewed, like Phyllis, were getting the loans to pay for one-time emergencies, others for monthly bills, others to pay for city-issued tickets, one to help with a cash deposit on an apartment, one to pay part of his son’s college tuition, and another to buy a Blu-ray Disc player.

Loan covers son’s college

Not all needs for the money were critical — and some were what many may consider foolish. But all knew what they were getting into.

“I don’t like to hear any type of storyline — especially from the government — telling me, ‘You shouldn’t do this; you should do this.’ I’m the type of person who takes care of my own business,” said Eric Dortch, 48, who took out a $4,000 loan from a payday lender in Evanston, Illinois, to be paid back over 12 months.

Mr. Dortch took out the loan so he could cover his son’s tuition, after being denied credit from Chase Bank and Bank of America as well as a Parent Plus loan from Sally Mae.

An Air Force veteran, Mr. Dortch works at a health care company in technology and said he doesn’t believe his son would have graduated from college if he didn’t have access to the payday loan.

“I paid basically 120 percent interest — double what I actually borrowed. But I didn’t think it was unfair,” said Mr. Dortch. “I did what I needed to do to handle the business.”

Mr. Dortch paid back the loan, with the interest, and has no regrets.

“My son wouldn’t have his college degree right now. Those who are against [payday lending], they don’t look at the bigger picture. There’s a certain demographic that may need the option,” he said. “I was taking care of business, made good on the loan, so what’s the problem?”

Most of the borrowers interviewed by The Times agreed with Mr. Dortch, saying it was their choice to take out the loan — good or bad. Most seemed to be pleased with the industry as a whole.

Lack of complaints

Sen. Elizabeth Warren, Massachusetts Democrat and the CFPB’s first chairwoman and the brain trust behind it, said consumers would lead the agency with their complaints. But by CFPBs own records, payday lending customers seem happy with the services.

Since December 2011, the CFPB has received 385,876 consumer complaints, but only 2,443, or 0.6 percent of them, were regarding the payday lending industry, according to Consumer Research.

However, the agency has had at least three hearings on payday lending — putting it on par with mortgages and debt collection in its regulatory focus.

“We’re not asking regulators in Washington to walk a mile in the shoes of our customers,” said Jamie Fulmer, senior vice president of public affairs for Advance America. “But exploring their rationale and understanding their needs and interests should be an integral part of the process.”

Mr. Fulmer added: “At best, the CFPB’s proposed payday lending regulation is flawed and misguided; at worst, it’s a solution in search of a problem. First, the bureau’s complaint database shows that less than 1 percent of the hundreds of thousands consumer complaints involve payday lenders. Second, the regulation would largely eliminate regulated lending, while overlooking illegal operators. And, third, officials have failed to adequately study the impact on consumers who value payday loans and use them responsibly.”

Twelve million American adults use payday loans annually. The average borrower takes out eight loans of $375 each per year and spends $520 on interest, according to a 2012 study by Pew Charitable Trusts.

Most borrowers use payday loans to cover ordinary living expenses over the course of months with the average borrower indebted about five months of the year, the study found.

A slight majority of payday loan borrowers are female, and a slight majority of borrowers are also white, the study found. Eighty-five percent of all borrowers don’t have a four-year college education, and 72 percent have a household income of less than $40,000, Pew said.

Michelle Washington, a home health aide who earns $14 an hour, said she depends on payday loans to get by. The 60-year-old has borrowed against her paycheck every other week since 2007, according to a report in the Star Tribune.

“I want to show my family I can make it on my own,” Ms. Washington said in an interview with the Minnesota newspaper. She knows she pays about $30 for every loan she takes out, equating to about $800 a year. Still, she signed a postcard petition in the state of Minnesota, saying she would be disappointed if her access ended.

Ms. Washington said she won’t borrow from friends or family and likes the feeling of independence that payday loans afford her, according to the report.

But it’s these sorts of examples that have the CFPB rushing to intervene.

“We believe that many people who live on the edge need access to credit that can help them manage their financial affairs,” Richard Cordray, CFPB’s director, said in March when the agency announced its rules on the payday lending industry.

“But we have also emphasized that the market for such credit products must be marked by responsible lending that helps rather than harms consumers. Extending credit to people in a way that sets them up to fail and ensnares considerable numbers of them in extended debt traps is simply not responsible,” he said.

Next: The successful model Florida officials have built in regulating payday lending at the state level, a model in danger of being superseded by the CFPB.


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