This month the Consumer Financial Protection Bureau came to Kansas City and put on a show for the news media, announcing new federal regulations that will essentially eliminate the regulated, short-term lending industry, greatly limiting millions of consumers’ access to a range of credit products — and put me out of business.
My company offers cash advances, or “payday loans” (typically around $350), that provide convenient access to funds that help thousands of working Missourians meet financial obligations. My customers use payday lending to manage periodic shortfalls because it’s less expensive than unlicensed loans, bank overdraft programs, bounced checks, late payments to credit card companies or utility re-connections.
Last year, I was selected by the Consumer Financial Protection Bureau as one of a number of “small entity representatives” to provide input on how the payday lending rule the agency outlined would affect small businesses. It was clear the bureau was not really interested in our perspective but was going through the motions required by law: the first material we received from the bureau didn’t have any small-business-specific data and included a prediction that its proposal would result in 59 to 84 percent revenue declines for our businesses.
You don’t need to be an MBA to know that an 84 percent loss in revenue will destroy small businesses and subject larger operators to a slow death. The proposed rules set bureaucratic requirements that no small operators could possibly meet, leaving consumers without a valuable, effective option for managing financial challenges. The bureau has utterly failed to understand my customers, dismissing the very real needs and the rational actions of millions of Americans. The bureau falsely assumes that if our stores close, people will suddenly be better off. But taking away my customers’ ability to borrow doesn’t erase their need for credit or ease the challenges they face.
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When I opened my first store in 1990, the state bank examiner told me that before the state allowed regulated short-term lending, people who needed small loans were using a black market that charged $100 to borrow $100 for seven days (we charge $10 for the same transaction today). If the bureau proposal is enacted, most of my customers will be forced into more expensive forms of credit.
The need for payday lending businesses reflects the financial pressures that my customers and millions of others face every day. I offer them a tool to manage their money without affecting their credit rating, while covering cash shortfalls with dignity and privacy.
It seems that the Consumer Financial Protection Bureau never really cared what small-business owners had to say; we were just another hurdle to reaching their predetermined goal of eliminating access to regulated payday loans. The bureau would have you believe that my customers would be better off if Washington forced my business to close.
But if they had bothered to listen to small businesses or the satisfied customers, these bureaucrats would know that consumers benefit from more choices, not fewer.
Bob Zeitler of Fenton, Mo., is the chairman and CEO of PH Financial, LLC, a provider of short-term loans in Missouri since 1990. He served as a small entity representative at the CFPB’s review of the impact of short-term lending rules on small businesses.