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 RESOURCES
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Ernst & Young
September 2009
The Cost of Providing Payday Loans in a US Multiline Operator Environment
Ernst & Young LLP ("Ernst & Young") was engaged by Financial Service Centers of America, Inc. ("FiSCA" or "Client") to perform a survey to determine the cost of the current Payday Advance product ("PDA") to multiline financial service center providers (operators offering additional services such as check cashing, money remittance and electronic bill payment). The current PDA product is a short term credit product offered pursuant to state law in approximately thirty-five states. Ernst & Young found that the average PDA offered by survey respondents was $379.....more
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Coalition for Financial Choice
Author: Jay Shipowitz
Open letter regarding the CFC initiative
ACE associates and customers have joined together in the fight for financial choice, but the fight is not over. This letter from ACE CEO and President, Jay Shipowitz, addresses the current state of the issue and what you can do to further the cause. See what he has to say when you...more
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Federal Deposit Insurance Corporation
November 2008
FDIC Study of Bank Overdraft Programs
In 2006, the Federal Deposit Insurance Corporation (FDIC) initiated a two-part study to gather empirical data on the types, characteristics, and use of overdraft programs operated by FDIC-supervised banks. The study was undertaken in response to the recent rapid growth in the use of automated overdraft programs, defined as programs in which the bank honors a customer's overdraft obligations using standardized procedures to determine whether the nonsufficient fund (NSF) transaction qualifies for overdraft coverage. Little empirical data have been available on these programs, their features, their managing practices, the fees imposed, and consumer usage patterns....more
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Clemson University Reports
Author: Michael T. Maloney
Payday Loans Do Not Cause Bankruptcy, Clemson University Study Finds
Dr. Petru S. Stoianovici and Prof. Michael T. Maloney studied the relationship between payday lending and bankruptcy filings over the period from 1990 to 2006. Using state-level data on the legality of payday lending and on the number of loan stores, the investigators found that neither the
legality of payday lending nor an increase in the number of loan stores led to higher rates of consumer bankruptcies...more
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Federal Reserve Bank of NY Staff Reports
Author: Donald P. Morgan
Defining and Detecting Predatory Lending
January 2007 - We define predatory lending as a welfare-reducing provision of credit. Using a textbook model, we show that lenders profit if they can tempt households into "debt traps," that is, overborrowing and delinquency. We then test whether payday lending fits our definition of predatory. We find that in states with higher payday loan limits, less educated households and households with uncertain income are less likely to be denied credit, but are not more likely to miss a debt payment. Absent higher delinquency, the extra credit from payday lenders does not fit our definition of predatory...more
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Federal Reserve Bank of NY Staff Reports
Authors: Donald P. Morgan and Michael R. Strain
Payday Holiday: How Households Fare after Payday Credit Bans
November 2007, Revised February 2008 - Payday loans are widely condemned as a "predatory debt trap." We test that claim by researching how households in Georgia and North Carolina have fared since those states banned payday loans in May 2004 and December 2005. Compared with households in states where payday lending is permitted, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same....more
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