online cash advance
Bogus Anti-Online cash advance Study Ignores
According to the National Credit Union Association, just how much overdraft and NSF fees does Self-Help Credit Union generate? That is the burning question, suggests Meyers. No doubt they can be proven to be truly dangerous, much more so than online cash advances.
• “Online cash advances of this sort have made the industry extremely profitable.”
Define “extremely profitable,” Meyers implores. Graves and Peterson make no comparison of online cash advance business profits with those of other industries. They also fail to recognize the role that default risk plays when evaluating said profits. The authors’ omissions “demonstrate ignorance as to how to read basic financial statements and analyze basic business profitability metrics,” writes Meyers.
• “Consumers that..make little headway on their loan principals generate the vast majority of the payday industry’s profit”
Wrong again, says Meyers. The report the study authors cite [Flannery; p.6] says that Flannery admits that evidence proving the above assertion is limited at best. But Flannery does say that “46.9 percent of store revenues come from frequent borrowers (not rollovers).” Since when has 46.9 percent qualified as a “majority?”
Do online cash advance companies target low-income or minorities?
Flannery says no [p.13]. Furthermore, Lehman’s critique of the CRL’s “Race Matters” study also tends to disprove what Graves and Peterson are claiming (that online cash advancestores are targeting these groups). From Lehman’s study:
Based upon their model of correlation and regression analysis, the authors assert that online cash advance firms locate stores in geographic locations with a high density of African-Americans, arguing that firms “prey” on African-American customers. However, the authors do not possess data on the actual customer base of the specific stores used in the analysis, so there is no way to know whether, for example, these online cash advance stores have a proportionately higher or lower number of African-American customers, or whether those customers even reside in the census tract in which the store is located. Theoretically, the stores may have a proportionately high or low number of African-American customers relative to the census tract in which they are located. And, theoretically, the stores may have a mix of customers who reside both inside and outside of the census tract in which the store is located. This is particularly a concern if the stores serve customers who work in close proximity, or who shop at retail outlets close to the online cash advance store, but who have a residence in another census tract. The data gathered by the authors of the study leave these questions unanswered.
Although the link between a online cash advance store’s customer base and its geographic location may be plausible, the data used in this study fail to show any direct connection between location in a census tract and the actual customer base of the stores themselves. The authors are simply asking readers to make a “leap of faith” that the makeup of the census tract is necessarily the same as the makeup of the store’s customer base, and then to infer from this loose connection that the online cash advance company made a calculated decision to locate the storefront in this census tract to achieve this result. In reality, the data used by the authors show no such connection. As Saltes (2005) accurately points out, “[T]he racial composition of people who live nearby a online cash advance store does not necessarily imply that the
store’s customers have the same characteristics.”
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