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Online cash advances Industry Victimized By Bogus Study
A few months ago, I posted my brief review of the academic paper “Usury Law and the Christian Right: Faith Based Political Power and the Geography of the American Online cash advance Regulation.” I did this because authors Stephen Graves and Christopher Peterson have a lot of interesting things to say about the online cash advance industry, much of it unintentionally counter to their intended purpose of showing thatonline cash advances are damaging to the public. In fact, online cash advances promote free market competition and are embraced by the very value set – the Christian right – that the authors claim are against the consumer loan product.
A new, more detailed critique of Graves and Peterson’s work has appeared in the blogosphere, written by Lawrence Meyers. Entitled “Usury Law & The Christian Right: A Critique,” Meyers points how Graves and Peterson’s work is “filled with false and misleading statements, faulty premises, empty hypotheses, weak methodology and completely unjustified conclusions.” Meyers even goes for far as to say that he is “flabbergasted that the paper was published in Catholic University’s Law Review.”
No academic objectivity
Clearly, the authors are biased against online cash advances. Their use of pejorative language undermines any academic credibility Graves and Peterson might pretend to have on the matter. It is not an objective report. Meyers shows how the authors describe online cash advance industry defenders as “apologists” [p.2,7]; that online cash advance companies “poured into American neighborhoods like water over a breached dam” [p.25]. Regarding the number of online cash advance stores, there is also no attempt at academic objectivity: “For those who are concerned about the social, moral, and even spiritual well being of the lower and moderate income Americans, this is a profound, unprecedented, and troubling change in the American nation.” [p.26]
What is false and what misleads
• “Payday lenders generally supplement revenue from…hefty late payment fees, insufficient funds fees and attorney fees.” [P.6]
Meyers recognizes this a falsehood. Such fees are in fact only allowed in three states. Furthermore, attorney’s fees do not factor into the income of such stores. Attorneys are only reimbursed for the collection of defaulted loans. That is customary, as is the standard business procedure that companies in nearly any service industry use of charging a bounced check fee.
• “Critics…point to a seemingly endless supply of consumer horror stories…” [p.2]
One bad experience attracts much more attention than a dozen good ones. Along similar lines, the media is always on the lookout for that sensational story. If one person borrows more than they can pay and becomes debt-ridden and destitute, it’s much more interesting that many people (myself among them) who have used online cash advances successfully.
• “Unfortunately, online cash advance borrowers frequently are unable to pay off their loans after the initial loan term.”
Once again, this is incorrect information. Meyers points to SEC filings of six notable public companies which indicate that “94 percent of all online cash advances are paid off on time.”
• “The best available nationwide estimate suggests that the average online cash advance borrower repays $793 for a $325 loan.”
Meyers shows us that the source Graves and Peterson use here – the Center for Responsible Lending – is very biased against the industry, because an affiliate company owned by CRL chair Martin Eakes (Self-Help Credit Union) is a direct competitor against online cash advance companies in the short term loan market.
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