Research, regulation, industry reports

People who love payday loans are hard to find

Fred Williams

Lee Edmundson doesn’t want a federal rule to limit his access to payday loans. At least not according to the official record.

“If the government limits the number of days I can have a loan, there will be many times that I need some help but can’t get it,” says his written comment to the U.S. Consumer Financial Protection Bureau.

But the North Carolina resident doesn’t remember writing that.

“I’m sure I didn’t leave that comment on anything,” he said in a phone call. “The way it’s worded, it doesn’t even sound like me.”

The regulatory filing that bears Edmundson’s name was one of thousands of pro-payday comments that appear to be personal anecdotes but use the same scripted phrases, putting their authenticity into question. For example, Edmundson’s plea about needing help appeared in more than 300 filings, word for word. The robo-comments draw from a menu of situations involving car repairs, utility bills and other surprise expenses.

The industry says that the deluge of pro-payday comments shows that people will be hurt by proposals to limit short-term loans. But it is difficult to find payday loan users who stand behind the comments under their names.

I sent 200 emails to people who used the scripted phrases, and whose email addresses were attached to their filings. There were three responses, including Edmundson. Only one of the three verified that the comments reflect his views. Five of the emails bounced back because the address didn’t work. The rest didn’t answer.

Cashelda Norman’s official comment said she took out a loan “to help me afford a rental when my car was in the shop.” The anecdote appears in more than 1,000 comments, in slightly different variations.

“I didn’t actually write the below,” Norman said about her comments, copied in my email to her. “Those were canned statements I selected on an iPad.”

Original or not, the comment is part of a bulging public file that regulators must review before imposing limits on payday loans. In a Dec. 1 letter to the CFPB, 43 Republican congressmen exhorted the agency to catch up with a backlog of comments waiting to be reviewed and published in the official record. As of Dec. 6, about 423,000 comments have been logged of 1.4 million received.

The consumer bureau proposed its small-dollar lending rule in June. If finalized, the rule will require payday lenders to review customers’ finances and turn away applicants who can’t pay back their loans. Payday loans under $500 are exempt from the review, if they offer repayment terms that break the costly cycle of re-borrowing.

Payday lenders, who say the rule will force many locations out of business, mounted a campaign to solicit comments from borrowers, partly using online comment forms. The industry group Consumer Financial Services Association has said the deluge of support for payday loans shows that regulators are out of touch with consumers.

Asked to comment for this article about the authenticity of pro-payday comments, the organization’s press representative said many groups encouraged customers to write in.

“We can’t answer for every customer letter, and we’re not going to comment on letters we had nothing to do with,” communications director Amy Cantu said in an email responding to the interview request. She said over 500,000 handwritten comments were filed, apart from comments that had computerized assistance.

The one robo-commenter I spoke to who stood behind his official statement was Esequiel Guerra, a factory worker in Warden, Washington. His July 19 statement talked about getting a rental car while his car was in the shop, echoing Norman’s comment and hundreds of others.

Guerra said he made the comment via a web link, which directed him to an online form. He said he answered a questionnaire, and also typed his own comment in the space provided. The comment filed in the record under his name use the recycled phrases that appear in other comments.

Guerra said he did not disagree with the scripted sentences in his comment. But his own, unscripted views give a different picture of how he uses payday loans.

“I’ll drive over there (to the lender) and take out $350, $400 at a time – not too much because the interest kind of blows me away,” he said in a telephone interview.  The cause might be to fix a blown tire, or just to have enough spare cash to treat his family to dinner out.

The state of Washington already imposes restrictions on payday loans, which Guerra said he supports. Loans are capped at $700 or less, depending on income, with no more than eight loans per year.

Guerra said he is a responsible borrower, but he sees the wisdom of the state’s tracking system that keeps borrowers from exceeding the caps. “People were abusing the system, going to one then going to a different one,” he said. “Now in Washington they’ll check if you have a loan already out somewhere else.”

If he takes out $300, he knows he has 45 days to pay it back, plus $45 interest. So he saves the amount from his paychecks and pays the loan off in time – without having to extend it and rack up more fees. “They always ask if I want to re-loan,” Guerra said. “I say ‘no, not today.’ “

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