The Consumer Financial Protection Bureau (CFPB) garnered a lot of headlines. Speaking in Kansas City, the federal watchdog agency outlined a new proposal of rules that would apply to the payday loan industry at the federal level. The move would affect the business model of payday loan stores across the country, from California to Maine.
The CFPB’s guidelines drew mixed reviews from consumer groups, anti-poverty activists, the payday loan industry and the corporate world. Some say the rules go too far, while others say they don’t go far enough, but it’s still a step in the right direction.
But can the CFPB payday loan rules affect jobs in jurisdictions across the United States? One employer in Wichita, Kansas believes they eventually will once they go into effect next year.
On Wednesday, Bill Baker of Curo Financial Technologies warned that the proposed rule could harm more than 600 employees the firm has at its Wichita office and call center. Since it limits the number of loans a person can take out in a short period of time and alter the way clients repay the loans, the changes could modify the way bad credit loan lenders such as Landmark Cash conduct business.
Ultimately, the Curo Financial Technologies executive warns it could lead to job cuts soon.
“We were disappointed with what they issued. Largely, what we in the industry believe it does is it cuts off access to short-term credit. One thing these rules can’t regulate is demand,” Baker said. “In states where prohibitive legislation has been put in for short-terms loans, we’ve seen customers turn to overdraft protection, which is far more expensive, or, worse yet, we’ve seen them turn to unlicensed lenders. Those avenues are almost always more expensive.”
He further explained that the rule proposal, which is 1,300 pages long, would turn out to be more harmful to consumers who need short-term credit to pay rent or cover an emergency. Baker noted that he’s not against federal regulations, but he doesn’t want to see credit options terminated for those who may “have nowhere else to turn.”
“Our customers understand the process and the product,” Baker said. “I think a lot of the folks making the regulations and making a lot of the comments in the media – even some consumer advocates – are people who have never had to take a short-term loan. There’s a delta between the reality and the messaging out there.”
With payday lenders earning more than $3.6 billion in fee revenue last year, critics of the industry say these businesses perpetuate poverty and help the impecunious enter into a spiral of debt. However, Baker notes that payday lenders always consider a customer’s situation.
“There’s a misnomer that we give very little consideration to a customer’s income and ability to repay,” Baker said. “We build sophisticated algorithms to predict people’s ability to repay. If we lend somebody $500 and they don’t pay us back, that’s not good for anybody.”
Beginning June 2, the CFPB is allocating the general public a 90-day window to comment on the proposal. Since it does not need congressional approval, the rules would likely go into effect as early as next year. The CFPB also warned that it will present more rules in the coming months.