As we announced last night, the Senate Appropriations Committee will hear on Tuesday a “Strike-Everything Amendment” that would reauthorize payday loans:  HB2370

Interestingly, the bill was pulled from the agenda this morning, only to reappear an hour later on a second agenda revision.

We’re not sure what happened, but clearly, this bill is looking like a Hail Mary pass for the payday lenders.

They’re counting on it passing this committee.  We must stop it.  Again!

Call the Committee Members today and tell them:

“Vote NO on HB2370: No More Special Deals for Payday Lenders!”

SENATE APPROPRIATIONS COMMITTEE:

• Sen. Rebecca Rios, District 23 – Pinal County
  Assistant Democratic Leader
  (602) 926-5685

• Sen. Amanda Aguirre, District 24 – Yuma
  (602) 926-4139

• Sen. Sylvia Allen, District 5 – Snowflake
  (602) 926-5219

• Sen. David Braswell, District 6 – Phoenix, Glendale, Cave Creek
  Newly appointed senator; replaced Pamela Gorman
  (602) 926-5284

• Sen. Ron Gould, District 3 – Lake Havasu City
  (602) 926-4138

• Sen. Jack Harper, District 4 – Surprise
  (602) 926-4178

• Sen. Al Melvin, District 26 – Tucson
  (602) 926-4326

• Sen. Paula Aboud, District 28 -  Tucson
  (602) 926-5262

• Sen. Russell Pearce, District 18 – Mesa
  COMMITTEE CHAIRMAN
  (602) 926-5760

HB2370, when it passed out of the House of Representatives and was sent to the Senate, dealt with theft of merchandise pallets.  But that was before the “strike-everything amendment.”

Now, bill sponsor Warde Nichols (East Valley) is allowing it to be used to push the payday lenders’ agenda, and Chairman Russell Pearce is complying.

At least they stayed with the theme of “theft.”

LANGUAGE OF THE BILL

They haven’t yet posted the language of the “theft”/payday bill, but we know it won’t be good.  At the very least, it will attempt to extend or repeal the July 1, 2010 payday loan sunset, the same sunset we all voted to uphold.

The payday lenders are running ads again, sending junk mail to voters again, and flooding your representatives’ email boxes with appeals to let them stay.

They’re still promising “reforms” and trying to make the case that what they are proposing now is different than Prop 200.  But if their last bill is any indication, what they’re proposing now is just more of the same.

Please call the Appropriations Committee Members right now.

Tell them:

• The voters have spoken.

• No extensions. No more special deals for payday lenders.

• No more laws that hurt consumers and undermine the free market.

• Enough is enough!

Payday lenders need to cap their loans at 36% APR, which is exactly what will happen when we uphold the 2010 Sunset.

After you’ve called the senators, shoot off a quick Letter to the Editor.

BE THERE TUESDAY:

Tuesday, March 16th

SENATE APPROPRIATIONS COMMITTEE

1:30 PM*

Arizona Senate, Hearing Room 109

1700 West Washington
Phoenix, AZ 85007

The payday industry will surely try to pack the hearing room with employees and “happy customers.” 
So, get there early and get a seat up front!

We recommend getting there by 12:30 and planning to stay as long as you can.

WE NEED YOUR PRESENCE THERE!

* Time may change.  We’ll keep you updated.

Think you can make it?
Let Kelly know – kelly@economicintegrity.org

~

To see the Prop 200 results in each of these senator’s districts, click here.

For tools you can download and share, visit the “Supporter Tools” box at www.NoMoreLoanSharks.com

Thank you for all you do,

David Higuera
Arizonans for Responsible Lending
(520) 907-2080

Paid for by Arizonans for Responsible Lending

Major Funding by AARP Arizona
Center for Responsible Lending, N.C., SEIU, Washington, and SIMG, Tucson.
Additional Support from Arizona State Credit Union, UFCW Local 99
The Arizona Credit Union League, and Mi Familia Vota.

www.NoMoreLoanSharks.com

On Tuesday, the Senate Appropriations Committee will hear a “Strike-Everything Amendment” that would reauthorize payday loans:  HB2370

Call the Committee Members today and tell them:
“Vote NO on HB2370. Enough is enough!”

Sen. Rebecca Rios, Pinal County — (602) 926-5685

Sen. Amanda Aguirre, Yuma — (602) 926-4139

Sen. Sylvia Allen, Snowflake — (602) 926-5219

Sen. David Braswell, Phoenix, Glendale, Cave Creek — (602) 926-5284
(newly appointed senator; replaced Pamela Gorman)

Sen. Ron Gould, Lake Havasu City — (602) 926-4138

Sen. Jack Harper, Surprise — (602) 926-4178

Sen. Al Melvin, Tucson — (602) 926-4326

Sen. Paula Aboud, Tucson — (602) 926-5262

Sen. Russell Pearce, Mesa — COMMITTEE CHAIRMAN — (602) 926-5760

A “Strike Everything Amendment” is a fancy way of saying: we don’t need to tell the public what we’re doing; we’ll pass a completely different bill by changing the language at the last minute.

In this case, HB2370, when it passed out of the House of Representatives and was sent to the Senate, dealt with merchandise pallets. Yup, those.

Now, bill sponsor Warde Nichols (East Valley) is allowing it to be used to push the payday lenders’ agenda, and Sen. Russell Pearce is complying.

They haven’t yet posted the language of the bill, but we know it won’t be good.  At the very least, it will attempt to extend or repeal the July 1, 2010 payday loan sunset, the same sunset we all voted to uphold.

The payday lenders are running ads again, sending more junk mail to voters, and flooding your representatives’ email boxes with appeals to let them stay.

They’re still promising “reforms” and trying to make the case that what they are proposing now is different than Prop 200.  But if their last bill is any indication, what they’re proposing now is just more of the same.

Please call the Appropriations Committee Members right now. Tell them, “No extensions.  No more special deals for payday lenders. No more laws that hurt consumers and undermine the free market.”

Payday lenders need to cap their loans at 36% APR like other lenders, which is exactly what will happen when we uphold the 2010 Sunset.

And Mark Your Calendars:

Tuesday, March 16th

1:30 PM*

SENATE APPROPRIATIONS COMMITTEE

Arizona Senate, Hearing Room 109

1700 West Washington
Phoenix, AZ 85007

* Time may change.  We’ll keep you updated.

The payday lenders will try to pack the house with their “satisfied customers” and employees.  We need to turn out in big numbers.

Think you can make it?
Let Kelly know – kelly@economicintegrity.org

~~

Contact the Committee Members TODAY! Your message can be short and to the point:

• The voters have spoken. We said “No” to 400% payday loans loud and clear.

• HB 2370, if it allows triple-digit interest rates to continue, is NOT reform.

• Allowing triple-digit payday lending to continue will result in thousands more Arizonans trapped in debt, year after year.

• We cannot allow out-of-state companies to continue to drain $150 million dollars from the state each year in fees stripped from trapped borrowers.

• Do what the voters demanded:  LET THE SUN SET on 400%

To see the Prop 200 results in each of these senator’s districts, click here. In every district, their constituents said “NO” to 400%!

Thank you,

Debbie McCune Davis

PS: For tools you can download and share, visit the “Supporter Tools” box at www.NoMoreLoanSharks.com

Paid for by Arizonans for Responsible Lending

Major Funding by AARP Arizona
Center for Responsible Lending, N.C., SEIU, Washington, and SIMG, Tucson.
Additional Support from Arizona State Credit Union, UFCW Local 99
The Arizona Credit Union League, and Mi Familia Vota.

www.NoMoreLoanSharks.com

The Arizona Consumers Council sent this letter to the Prescott Daily Courier, in response a letter from the “Center for Consumer Freedom” (a payday astroturf organization) that suggested that imposing fee caps on pay day loans will cut off a necessary resource.

Dear Editor:

In 2008, pay day lenders funded a pricey initiative in an attempt to ensure they could continue to offer their high cost loans to low income Arizonans in perpetuity. They lost. Big time. Sixty percent of Arizonans told the pay day lending vampires: Go home. Quit sucking hundreds of millions of dollars in interest from working Arizonans.

Loud and clear as this message was, the pay day lenders and their supporters in the Arizona legislature didn’t hear it. They are back again this year (having lost last year), in yet another attempt to keep plying their trade. They argue, as they did in a recent letter to the editor from the Center for Consumer Freedom, that they provide a necessary service to those who need emergency cash. They suggest that it’s “elitist” to cut off this source of funds.

But they are wrong: Legislators who vote no on pay day lending aren’t “elitist.” Instead, they are smart, because they are doing what the voters who elected them told them to do. Voters in every district in this state had their say on pay day lending, and they said it’s time for these predators to go.

As we all know, Arizona faces challenging times. We need to broaden our economic base so there are good jobs in diverse industries for our citizens. We need to make sure we have an educated workforce so that we attract and keep good employers. We need our legislators to focus on these difficult tasks, rather than going behind voters’ backs to help an industry that takes money from our workers.

Sincerely yours,

Leslie Kyman Cooper

Executive Director

Arizona Consumers Council

The influential $42 billion-a-year payday lending industry, thriving from a surge in emergency loans to people struggling through the recession, is pouring record sums into lobbying, campaign contributions, and public relations – and getting results.

As the Senate prepares to take up financial reform, lobbyists are working to exempt companies that make short-term cash loans from proposed new federal regulations and policing. In state capitals around the country, payday companies have been fighting some 100 pieces of legislation aimed at safeguarding borrowers from high interest rates and from falling into excessive debt.

Last year, as the U.S. House drew up a financial reform bill, some lawmakers who were courted by the companies and received campaign contributions from them helped crush amendments seeking to restrict payday practices, a review by the Huffington Post Investigative Fund has found.

The failed amendments would have capped payday interest rates – which reach triple digits on an annualized basis — and would have limited the number of loans a lender could make to a customer. Working largely behind the scenes, the industry ended up dividing the Democratic majority on the 71-member House Financial Services Committee.

Lobbyists swayed not only conservative, free-market-minded “Blue Dogs” but liberals from poorer, urban districts where payday lenders are often most active. At least one of the liberals threatened to vote with Republicans against the financial reform bill if it restricted payday lenders.

“The payday lenders have done a lot of work,” House Financial Services Chairman Barney Frank (D-Mass.) said in an interview. “They’ve been very good at cultivating Democrats and minorities.”

Now the industry has turned its attention to the Senate and the reform bill being assembled by Senate Banking Chairman Christopher Dodd (D-Conn.), who is offering to abandon the quest for a new independent agency to protect consumers, instead giving the Federal Reserve new policing powers that could extend to payday companies.

Spokesmen for payday lenders say that attempts to rein in their business are misplaced. Short-term cash loans were not a cause of the financial crisis, they say, and as lenders of last resort they claim to provide a critically needed service in an economic downturn.

To convey their message, payday lenders have hired some of the lobbying industry’s top guns. Trade groups have financed studies to underscore the small profit margin on each loan. The groups also have created a database of more than a half-million customers who can be quickly mobilized to persuade specific politicians. The persuasion often takes the form of personal, handwritten accounts from constituents about how quick cash helped them during times of financial need.

Steven Schlein, a spokesman for an industry trade group, the Community Financial Services Association, said the industry’s victory in the House against the proposed amendments was hardly final.

“We were worried,” said Schlein. “But we worked it hard. We have lobbyists, and they made their point. The banks worked it hard, too. But we’re still in the middle of what could be a big fight.”

22,000 Storefronts

Payday loans got their name because many of the small, unsecured loans are made as advances on a borrower’s next paycheck. Operating from some 22,000 storefronts, the lenders specialize in instantly available short-term loans that typically require repayment within two weeks. While interest rates vary, typical fees are $15 to $25 for every $100 borrowed. In Virginia, someone who borrows $200 from one big lender, Advance America, must come up with $247.80 within 14 days; the fee is equivalent to a 623 percent annual rate.

Lenders range from small bodegas in Albuquerque or Miami to the chain stores of publicly traded corporations such as Cash America International Inc. and Advance America Cash Advance Centers Inc. The financial crisis has been good for their bottom lines. Advance America, for example, reported $54 million in net income in 2009, a 41 percent increase over the previous year.

Most families who took out payday loans in the years leading up the financial crisis used them to cope with emergencies or to pay for rent, utilities and food, according to a February 2009 study by the Federal Reserve Board.

Customers taking out multiple loans can face a cascading series of fees. “Some people borrow $500 and end up owing $3,000,” said Jan Zavislan, a deputy attorney general in Colorado, which placed some limits on payday lenders in 2000. “Without our state regulation of this industry, payday lending would be usurious.”

The financial reform bill passed by the U.S. House would create an independent Consumer Financial Protection Agency to oversee mortgages, credit cards and loans by almost all banks, savings and loans, credit unions and payday lenders. For the Senate version, Dodd and Republicans now appear close to an agreement that would jettison the notion of a stand-alone agency, which Republicans and moderate Democrats argued was unnecessary.

The activity in Congress led the industry to spend $6.1 million lobbying Washington last year, more than twice what it spent a year earlier, according to an Investigative Fund analysis of lobbying reports. The total is about equal to what JPMorgan Chase &Co. spent on lobbying in 2009. The Community Financial Services Association alone increased its spending by 74 percent, to $2.56 million.

Industry representatives say they are tracking 178 different pieces of legislation around the country – 101 of which they oppose. In response, in 34 states and the nation’s capital, the industry and its companies have 40 of their own in-house lobbyists, while paying another 75 outside lobbyists.

Meanwhile, an analysis of federal elections records shows payday-linked political contributions are streaming into the campaigns of members of Congress. At the current rate — $1.3 million since the start of last year — the amount of money spent before the 2010 midterm elections could easily surpass the industry’s spending during the 2007-2008 presidential campaign season.

Some of the industry’s biggest lobbyists in Washington have experience resisting regulation of riskier forms of lending.

Wright Andrews, whose lobbying shop Butera & Andrews earned $4 million in fees for coordinating the subprime industry’s lobbying between 2002 and 2006, now represents the payday industry. Records show his firm earned $240,000 from the Community Financial Services Association in 2009.

Another lobbyist hired by the trade group, Timothy Rupli, is one of the best-known and most prolific hosts of fundraisers on Capitol Hill. He has sponsored at least 94 since 2008, according to invitations tracked by the Sunlight Foundation, a Washington-based nonpartisan group. Politicians and donors gather at Rupli’s townhouse on New Jersey Avenue only two or three blocks from the offices of members of Congress. Beneficiaries of the fundraisers have included members of the House Financial Services Committee.

Since 2005, Rupli and his wife, Linda, have contributed $220,349 directly to lawmakers in Washington. During that time, Rupli earned $4.9 million in lobbying fees from the financial services association, according to lobbying disclosure reports.

States of Influence

Payday lenders also contribute millions to candidates in state elections, making them among the dozen or so top donors when figures for state and federal campaign contributions are added together. That puts them in the same influential ballpark, for instance, as unions, the gaming industry and real estate interests.

In Wisconsin alone, efforts to establish an interest rate ceiling of 36 percent mobilized at least 27 registered lobbyists against it. On Feb. 16, Wisconsin lawmakers adopted a bill that could lead to regulation of payday lenders for the first time, but not before rejecting the interest rate limit. The debate garnered more than the usual public attention when the state assembly’s speaker acknowledged having a romantic relationship with a payday industry lobbyist.

In Arizona and Ohio, the industry spent $30 million in 2008 campaigning for ballot initiatives that would have wiped out laws curtailing payday lending operations. By contrast, reform groups reported spending only $475,000.

Although the industry doesn’t always win, “there’s no way you can outspend them,” said Jennifer J. Johnson, senior legislative counsel to the Center for Responsible Lending, a prime nemesis of the payday lenders.

The industry argues that more oversight — especially from Washington — isn’t necessary. Among the most active trade groups making the case is Hackensack, N.J.-based Financial Service Centers of America, or FiSCA. “Financial service centers had absolutely no role in the nation’s financial crisis,” said Joe Coleman, chairman of the group, which represents half of the nation’s purveyors of check cashing, money transfers, money orders, bill payments and small dollar, short-term loans.

In fact, payday lenders contend their services are needed now more than ever. “Who’s going to make that kind of credit available to working people besides us?” asked Schlein, the spokesman for the other major trade group, the Community Financial Services Association.

The industry’s critics, who include several state attorneys general, say that the industry buries too many people in debt. Meaningful restrictions and policing of the industry are long overdue, they argue.

“Payday lending is like needing a life preserver and being in front of an anvil,” said North Carolina attorney general Roy Cooper, a former legislator who worked to eliminate major payday lenders from the state and succeeded in 2006.

Unlikely Allies

Even in states that have successfully imposed limits on payday lenders, the companies sometimes find inventive ways around the rules. State and federal agencies often lack clear and consistent authority; in some states, lenders have responded to tougher regulations by moving operations to tribal lands or onto the Internet.

After Virginia’s legislature tried to restrict fees in 2009, lenders switched to making car-title loans, with automobiles as collateral. In Ohio, payday lenders are working around a new 28 percent rate cap by invoking two older laws governing installment loans that appear to permit higher rates. In Colorado, some lenders have skirted limits on the number of consecutive loans they can make to a customer by adding five-day periods between loans.

Last October, Colorado was the site of an industry conference aimed at mobilizing hundreds of companies specializing in providing rapid access to money through payday loans and other services. The meeting at the luxurious Broadmoor Hotel, sitting on 3,000 acres of golf courses and rolling forest at the foot of the Rockies, was sponsored by the trade group FiSCA.

PowerPoint presentations, handouts, and interviews with participants suggest an industry that is growing more anxious and methodical in countering threats to its business model. Featured presentations included topics such as, “Organizing a Grassroots Effort.” One PowerPoint underscored the broader range of tactics needed to defeat the industry’s enemies. Stated the slide: “The days of just lobbying are forever gone.”

Another slide, from a presentation by Kevin B. Kimble, a vice president of Cash America, the nation’s largest supplier of pawn loans, and William Sellery Jr., a top FiSCA lobbyist, warned: “Payday lending now in play.” They characterized the industry’s strategic response as an “aggressive, multi-pronged defense” of payday lending, including not just traditional means of influence but creation of organizations such a “Coalition for Financial Choice” to counter the image of payday lenders as debt traps. The group’s Web site, www.coalitionforfinancialchoice.org, describes financial services as a “fundamental right” and urges supporters to refer to themselves as “pro consumer choice.”

The industry has reached out to seemingly unlikely allies. A luncheon speaker at the conference was Marc Morial, chief executive of the National Urban League, one of the nation’s oldest civil rights organizations. Morial, a former mayor of New Orleans, has been among participants in a so-called “Small Dollar Loan Dialogue Program.” The program involves inviting civic leaders and consumer advocates to unpublicized FiSCA-sponsored gatherings in hotel conference rooms to hash out differences over regulatory proposals.

‘Turned Heads on the Hill’

As part of its congressional strategy, FiSCA commissioned a study last year that concluded that payday customers fare better and lenders fare worse than is commonly thought. According to the report, prepared for the trade group by the accounting firm Ernst & Young, a payday lender earns a average fee of $15.26 on a $100 loan and keeps only $1.37 as profit because of high costs and the need to absorb bad debts.

Last fall, as Congress began debating financial reform, the Ernst & Young study was being distributed along with fact sheets to a number of Capitol Hill aides. Two of them acknowledged privately to the Investigative Fund, on condition that neither they nor their bosses were identified, that the report changed their perceptions of the industry.

During discussions about consumer protections within the reform bill, key members of the financial services and rules committees of the House also received scores of handwritten letters from customers who were listed in the industry’s database. Some got calls from managers of payday lending locations in their districts, according to interviews with congressional aides and industry representatives.

The tactics helped, said William P. Murray, a key industry strategist hired by FiSCA. “They absolutely opened eyes and turned heads on the Hill,” said Murray. “Many customers don’t feel empowered. To a large degree, what we’ve created has empowered them.”

In the House Financial Services Committee, the industry’s efforts bore fruit. Rep. Jackie Speier (D-Calif.), offered an amendment to limit payday interest rates to the annual equivalent of 36 percent. It never got traction.

Rep. Luis Gutierrez (D-Ill.), chairman of the subcommittee with authority over consumer credit issues, had once advocated extending to all Americans an effective ban on payday lending for military personnel that Congress passed in 2006. By last year he had scaled back, urging an amendment that would have limited to six the number of loans a borrower could receive in a year.

Gutierrez’ less-restrictive amendment died when Democrats including Rep. Alcee Hastings (D-Fla.), threatened to vote against the entire consumer protection act if the payday provision was included. It also faced opposition from Rep. Joe Baca (D-Calif.), who countered Gutierrez with an amendment the industry regarded as favorable because it had the potential to open payday lending to new markets. Baca said in a statement last year that while “fly by night lenders” should be banned, he wanted to “ensure that students, blue collar workers, teachers, police officers and others have access to legitimate payday advance loans if needed.”

All of the lawmakers – as well as many of their colleagues on the House Financial Services Committee – have received campaign contributions from the industry, its executives, employees and lobbyists. Since 2006, Gutierrez has received $38,550, Baca $16,250 and Hastings $13,500. Almost all of Baca’s contributions were reported during the last half of 2009, as the financial reform bill took shape. Chairman Frank has received $12,300 from the industry’s political action committees since 2006, and last year even Speier received some donations from the payday industry’s PACs: $3,500.

Gutierrez, Baca and Hastings declined requests to be interviewed for this story.

Schlein, the payday trade group spokesman, said what really made a difference with some members of Congress was the letters from customers and data underscoring the industry’s small profit margin on each loan.

“I wouldn’t say we brought Baca aboard, but he understands now,” said Schlein. “He doesn’t come out against the industry with unfounded vitriol. The reason is we showed him, and he did the math.”

So did committee chairman Frank, who tallied more support for Baca than for Gutierrez. He quickly nixed any payday amendments at all. “I felt if we went to votes on the floor, we’d be likely to get a bad amendment rather than a good one,” Frank said in the interview.

Following their victory in the House, payday industry lobbyists have joined dozens of others paid by the financial industry to make sure the Senate does not vote to create an independent Consumer Financial Protection Agency.

Selected senators have already received handwritten letters. One woman wrote to Sen. Lindsey Graham (R-S.C.) to explain how she’d been out of work for two weeks when her daughter fell ill with pneumonia. Rapidly, “bills fell behind, and I still had a family to feed,” she wrote. A quick cash loan “helped me through some difficult times.”

For the payday industry, an end to difficult times in Washington could be in sight: Without an independent agency, the companies may be more likely to escape national policing. None of the existing agencies that oversee financial institutions have jurisdiction over them.

Investigative Fund intern Adele Hampton contributed research for this story.

Paying for Influence: Payday Industry Money in Congress:

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Critics say the high fees that come with the loans send the jobless into a cycle of debt.  The industry sees it as a service for people in need.

The payday loan industry has found a new and lucrative source of business: the unemployed.

Payday lenders, which typically provide workers with cash advances on their paychecks, are offering the same service to those covered by unemployment insurance.

No job? No problem. A typical unemployed Californian receiving $300 a week in benefits can walk into one of hundreds of storefront operations statewide and walk out with $255 well before that government check arrives — for a $45 fee. Annualized, that’s an interest rate of 459%.

Critics of the practice, which has grown as the jobless rate has increased, say these pricey loans are sending the unemployed into a cycle of debt from which it will be tough to emerge.

Many payday clients pay off their loans and immediately take out another, or borrow from a second lender to pay off the first, and sink ever deeper into debt. Typical customers take out such loans about 10 times a year, by some estimates.

Lenders “market the product to give the illusion of assistance,” said Ginna Green, a spokeswoman for the advocacy group Center for Responsible Lending. “But instead of throwing them a life jacket they’re throwing them a cinder block.”

The industry sees it as a service, providing short-term loans to people who wouldn’t stand a chance with a conventional bank.

What’s clear is that in California, where the unemployment rate hit 12.4% in December, some jobless workers in need of quick cash are turning to payday lenders, regardless of cost.

Ed Reyes, a Los Angeles resident who lost his job in retail about six months ago, said he has had to take out payday loans three times since becoming unemployed. The advances on his government check, he said, have helped him pay his household bills before late charges accrue.

“To be honest, I didn’t know if they’d give me one, but they did,” he said, standing outside the unemployment benefits office in downtown Los Angeles.

Ignacio Rodrigues, a clerk at Van Nuys payday lender Ace Cash Express, said about a quarter of first-time borrowers he sees now use their unemployment checks as proof of income.

“They just need extra money, and we do it,” he said of the instant loans.

It’s legal. Payday lending is regulated by the state, but lenders are not required to check sources of income. A borrower needs only to have a bank account and valid identification to get a loan.

Consumer Federation of America
The Financial Services Roundtable
Employee Benefit Research Institute

FOR IMMEDIATE RELEASE — February 18, 2010



New survey shows Americans believe banks could help low- and moderate-income families save by offering and promoting low balance requirements and Automatic Savings

Major Financial Institutions Commit to Promote Automatic Savings

PRESS CONTACTS:
Jack Gillis, Consumer Federation of America, 202-737-0766
Elise Brooks, Financial Services Roundtable, 202-589-2427

WASHINGTON, DC – Kicking off a new historic partnership, The Financial Services Roundtable, Consumer Federation of America (CFA), and Employee Benefit Research Institute (EBRI) released new data on how America saves.  They also announced a commitment to promote automatic saving, especially by low- and moderate-income households.

Said Ron O’Hanley, President & CEO of BNY Mellon Asset Management and Co-Chair of The Roundtable’s Council on Asset Management:  “This savings crisis ranges from the many low- and moderate-income families who do not have an emergency savings fund to cover unexpected expenses to the retirement crisis that threatens the retirement security of the vast majority of Americans.”  And he added: “Research has repeatedly shown that the most effective way to save for anything is through auto-savings.”

The three groups released new data on saving, consumer attitudes about saving, bank automatic savings products and promotion, a best practices commitment, and financial institution participation in next week’s America Saves Week.

• A new analysis of the Fed’s latest Survey of Consumer Finances data found that less than one-third (32%) of low-income households and less than half (48%) of moderate-income households, but four-fifths (80%) of upper-income households, have savings or money market accounts.

• A nationwide survey this month learned that a large majority of Americans (83%) believe the most effective way to build personal savings is to automatically transfer funds from paycheck or checking to savings or investments.  And a large majority (78%) believes that if banks and credit unions made it a priority to promote and offer automatic savings incentives, American families would save more effectively.

• Research on large bank practices found that nearly all offer free regular transfers from checking, and a majority lower minimums when regular automatic deposits are made, but only some institutions offer incentives for customers to save automatically.

• The Roundtable and CFA announce new best automatic savings practices for banks and commit to promote these best practices.

• Major financial institutions have agreed to use the America Saves Week logo in ads, websites, and/or flyers.

Many American Families Don’t Have Savings Accounts

Recent research completed for CFA by Ohio State Professor Catherine Montalto, using the latest Federal Reserve Board Survey of Consumer Finances data, revealed that most low- and moderate-income households don’t have savings accounts.

• Less than one-third (32%) of low-income households – bottom quintile with incomes below $18,900 in 2007 – have savings or money market accounts.

• Less than one-half (48%) of moderate-income households – second quintile with incomes $18,900-33,899 – have savings or money market accounts.

• Even less than three-fifths (58%) of middle-income households – third quintile with incomes $33,899-53,599 – have an account.

• But 80% of upper-income households – highest quintile with income above $89,300 – have an account.

“Most of the families without savings accounts do not even have adequate funds to cover emergency expenditures, let alone to save for homeownership or retirement,” said CFA Executive Director Stephen Brobeck.  “But most do have a checking account so have a convenient opportunity to save automatically,” he added.

Most Americans Support Automatic Savings at Banks and Credit Unions

A nationwide survey of more than 1000 representative adult Americans, commissioned by CFA and undertaken by Opinion Research Corporation in early February, revealed that:

• A large majority of Americans (83% vs. 15%) agree the “most effective way to build personal savings is to do so automatically by agreeing in advance to transfer funds regularly from a paycheck or checking to savings or investments.”

• A large majority (78% vs. 20%) also believe that if banks and credit unions “made it a priority to promote and offer incentives for all their customers to save automatically, this would help American families save more effectively.”  Low (74%) and moderate (78%) income households agree.

• Moreover, a large majority (69% vs. 26%) believe that banks’ and credit unions’ “eliminating opening and minimum balance requirements, as long as the customer agrees to an automatic transfer of at least $25 each month from checking,” is a positive development.  And low (64%) and moderate (68%) income households agree.

Most Big Banks Offer But Do Not Yet Effectively Promote Automatic Savings

A survey conducted earlier this year by The Financial Services Roundtable of the automatic savings products and promotion by 22 of its members, which include most of the nation’s largest banks, and recent research by the Consumer Federation in the websites of the 50 largest banks by number of branches, revealed widespread offering, but not promotion, of automatic savings from checking accounts.

• Nearly all banks offer free regular transfers from checking to saving.

• A majority of all banks surveyed lower minimums when regular automatic deposits are made – e.g., 16 of the 22 banks surveyed by The Roundtable.

• This automatic savings is often linked to customer saving for a specific goal such as Christmas, a home, education, or medical care.

• Some banks surveyed offer an incentive – such as higher interest, matched interest, cash bonus, gift card – to save automatically.  For example:
• • Fifth Third Bank provides a double interest bonus to those who meet a goal in the Goal Setter Savings.
  • U.S. Bank offers a $50 Rewards Card for the first $1,000 in savings and another $50 Rewards Card if that balance is maintained for a year in its S.T.A.R.T. Savings Today and Rewards Tomorrow program.
  • SunTrust, in its Get Started Savings Program that in March will become its Live Solid Savings, offers a 1.5% rate for two months and a 2% anniversary bonus (up to $50) as well as free overdraft protection for those agreeing to automatically transfer at least $25 monthly to savings.
  • Regions, in its LifeGreen Savings, provides a 1% interest rate bonus if automatic deposits are made for 12 months.
  • BBVA Compass, in its Build My Savings^SM, will match, on an annual basis, up to 6% of a customer’s monthly automatic savings transfer amount. This program will be launching in April.
  • Bank of America, in its Keep the Change program, rounds up debit card purchases and transfers the difference from checking to savings where it provides a 100% match for three months then matches 5% a year (up to $250/year).

• The Way2Save® account, created by Wachovia, will be offered to Wells Fargo customers in the future. It’s a savings account that can be linked to checking, turning purchases into automatic savings by transferring $1 from checking to the Way2Save® account each time you make a check card purchase or use bill pay.

• There is evidence that the promotion of automatic savings can be effective.  In the Roundtable survey:
  • SunTrust reported that it had sold more than 100,000 of its Get Started Savings accounts in the past year.
  • Regions reported that, because of their LifeGreen Savings program, the percentage of those opening a checking account who also opened a savings account rose from one-fifth to one-half.
  • Huntington reported that new checking customers responded to letters promoting automatic savings at twice the rate they have responded to other direct mail offers.
  • Bank of America has enrolled more than 12 million customers, who have saved over $3 billion, in its Keep the Change program.
  • One out of every three new U.S. Bank customers are enrolling in S.T.A.R.T. where it is available.

“Decades ago the Christmas Club account was a mainstay community activity at many banks, where it helped instill a culture of saving for the future that credit cards and easy credit eroded,” said EBRI President Dallas Salisbury.  “Banks need to renew that primary value in the community by teaching customers the value of saving and providing innovative products to make this possible,” he added.

Financial Services Roundtable Announces Commitment to Promote Automatic Savings

The Financial Services Roundtable announced its commitment to promote savings in two important ways.  First, through its Council on Asset Management, it has encouraged members to participate actively and visibly in next week’s America Saves Week.  That participation includes:

• Dreyfus putting the America Saves Week logo in ads, in Dreyfus Financial Centers, and on their website;

• US Bank incorporating the logo into television and radio advertisements as well as print insertions;

• Wells Fargo putting the logo on flyers in stores; and

• Union Bank offering a $25 bonus to those opening a new savings account.

Second, with CFA, The Roundtable has developed Best Practices for Automatic Savings and committed to promoting these best practices to its members.  The practices are:

• Free automatic transfers from checking to savings.
• Low minimums for automatic savers.
• Incentives for customers to use automatic savings.
• Good disclosure of automatic savings options.
• Active promotion of these options.
• Increased percentage of checking customers, especially small depositors, who save automatically.

“The Roundtable will do everything in its power to encourage retail banks to adopt these practices to improve their programs so that they meet these criteria,” said Roundtable President Steve Bartlett.  “Moreover, we commit to publishing a review of our progress in one year,” he added.

“The Consumer Federation commends The Roundtable for taking this initiative,” said CFA’s Brobeck.  “Not only will bank customers benefit, over time so will banks and the whole nation,” he added.

The Financial Services Roundtable represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer.

The Consumer Federation of America is a non-profit association of some 280 consumer groups that, since 1968, has sought to advance the consumer interest through research, advocacy, and education.

The Employee Benefit Research Institute (EBRI) is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

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Paid for by Arizonans for Responsible Lending

Major Funding by AARP Arizona
Center for Responsible Lending, N.C., SEIU, Washington, and SIMG, Tucson.
Additional Support from Arizona State Credit Union, UFCW Local 99 Arizona
The Arizona Credit Union League, and Mi Familia Vota.

www.NoMoreLoanSharks.com

The payday loan industry is up against the wall. 

They’re down to their final week — this week — to try to pass a bill through committee and the House Floor, before the House and the Senate begin taking up legislation from the opposite chamber.

This is a critical moment in the campaign to protect the will of the voters and uphold the 2010 sunset.  Please call your representatives today:

Tell them to uphold the payday loan sunset!

With their backs firmly against the wall, the payday lenders have opened their checkbooks in ways that are both disturbing and shocking, even for this industry.

They’re trying to pick up at least one Democratic vote in the House and stop the bleeding of Republican votes.

To do so, they’ve taken to:

• Hiring any lobbyist that will take their money.  To date, the payday lenders already have 13 lobbyists working the Arizona Legislature, not including Grant Woods and Chuck Coughlin, key advisers to the Governor, who are working the community;

• Wining and dining legislators at unprecedented levels;

• Flying in industry executives, former NFL stars and others to try to persuade legislators to let them stay;

• Showing up at community leaders’ homes unannounced and after hours to try to get an audience and change their minds;

• Hiring popular bloggers to repeat their talking points;

• Stacking the membership of the Greater Phoenix Chamber of Commerce and other chambers in order to “win” their endorsement; and

• Attempting to hire yet more lobbying firms, particularly major in-state Democratic firms, while making it clear that cost is no object…

All told, they must be spending north of $200,000 a month trying to save their usurious business model in Arizona. And it could be a lot more.

As disturbing as these tactics are, we have seen them before.  This is, after all, the same industry that spent $14.8 million trying to promote their phony “reform” initiative in 2008.

And all the while, they are drafting new legislative language that is riddled with loopholes and ultimately still allows their predatory, triple-digit interest rates.

The payday lenders are pulling out all the stops. And they’re talking to your Representatives every day…

Your Representatives need to hear from YOU today!

If you are not certain who your state representatives are, simply enter your address here to find out.

Call your representatives TODAY and demand that they uphold the will of the voters.

Tell them, “The Sun Must Set on 400%.  Period.”

Thank you,

David Higuera
Arizonans for Responsible Lending

~~~

Paid for by Arizonans for Responsible Lending

Major Funding by AARP Arizona
Center for Responsible Lending, N.C., SEIU, Washington, and SIMG, Tucson.
Additional Support from Arizona State Credit Union, UFCW Local 99 Arizona
The Arizona Credit Union League, and Mi Familia Vota.

www.NoMoreLoanSharks.com

The math isn’t adding up for Arizona’s payday loan industry.

The industry that provides small short-term loans is fighting in the Legislature to keep itself alive beyond a June 30 termination date that was included in the authorization law enacted 10 years ago.

Almost a month after the bill failed to even reach its first hurdle – a committee vote in the House – the measure remains stalled, even though the industry has earned the recent backing of several major business advocacy groups.

The bill was blasted by lawmakers from both parties after voters in 2008 soundly rejected an initiative that would have allowed the lenders to stay open permanently. Rep. Andy Tobin of Paulden, the bill’s Republican sponsor, said the lack so far of significant bipartisan support could doom the measure in the 60-member House.

“I’m not going to push to get 31 Republican members on this when the industry needs to go out and make this work,” he said. “They failed the last time. Now they’ve got another opportunity. Maybe you figure it might be their last opportunity.”

Payday lenders operate under a temporary exemption from Arizona’s 36-percent cap on annual interest rates. They charge $17.65 per $100 borrowed for a two-week loan, which amounts to an annual rate above 400 percent. The exemption expires on June 30.

Payday lending opponents say the industry preys on poor people in desperate situations, sometimes trapping them in a cycle of debt where they use one payday loan to pay off another.

Industry proponents say the market has shown a need for short-term, small-dollar loans that aren’t generally available from banks or credit unions. They say the industry supports low-income families that otherwise wouldn’t have access to credit in an emergency.

The Greater Phoenix Chamber of Commerce wouldn’t support the 2008 ballot measure because Arizona’s protections for voter-approved laws would have made it hard to change later on. But the current pending legislation doesn’t pose that problem, said Michelle Bolton, a chamber vice president.

Both the Phoenix and the Arizona chambers of commerce have lauded the pending bill’s regulatory and consumer-protection provisions.

“We’re talking with lawmakers. We’re asking them to consider it,” Bolton said. “We’re telling them this is a much better way to consider the sunset and have much better oversight.”

Lawmakers in recent weeks have engaged in quiet negotiations. Several people familiar with the talks said they’re hung up on a core issue: how much interest can payday lenders charge their customers?

Rep. Ed Ableser, minority House Democrats’ point man in the talks, said he’s fighting to hold the industry to 36 percent. But industry lobbyist Lee Miller said that rate wouldn’t generate enough revenue to cover overhead costs.

Miller acknowledged that the industry’s critics have the leverage of the June 30 sunset: The industry dies with no reauthorization.

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Civic Leaders across the State

Register Their Disapproval with 400% Payday Lending

Cities of Mesa, Phoenix and Tucson agree: The Sun Must Set on 400%

TUCSON – Last week, the Mesa City Council announced their opposition to the re-authorization of 400% payday lending in Arizona.  The Council made clear that the July 1, 2010 payday loan sunset must stay in effect, thus reinforcing the Consumer Loan Act’s 36% interest rate cap on all small-dollar loans.

Mesa joins the City of Phoenix and the City of Tucson, both of which took stands against payday loan re-authorization legislation in the last couple of weeks.

As quoted in Friday’s Arizona Republic, Mesa City Council Member Dennis Kavanaugh compared the payday loan industry to a vampire, saying, “They suck money out of the community and contribute little.”

Added Council Member Dave Richins, regarding the payday lenders’ claim that enforcing the 36% cap will force them to shut down and leave commercial properties vacant, “I really think more legitimate businesses will move into the vacuum.”

The Phoenix City Council also instructed its intergovernmental affairs team last week to oppose any legislation that would repeal or extend the 2010 payday loan sunset.

Stated Phoenix City Council Member Tom Simplot, “We must stand together to fight the insidious payday loan industry that preys upon the most vulnerable while denigrating our neighborhoods.”

The City of Tucson issued its 2010 Legislative Agenda on January 26^th, which highlights the City’s top four legislative priorities for the year.  Among them: “Urge the State Legislature to stand against exploitative payday lending practices in Arizona and oppose efforts to extend these practices indefinitely.”

Stated Tucson City Council Member Karin Uhlich, who is also director of the Center for Economic Integrity, “It’s amazing to me that any legislator would even consider voting for a bill to extend a lifeline to payday lenders.  The voters were quite clear: the July 1st sunset cannot arrive soon enough!”

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Paid for by Arizonans for Responsible Lending

Major Funding by AARP Arizona
Center for Responsible Lending, N.C., SEIU, Washington, and SIMG, Tucson.
Additional Support from Arizona State Credit Union, UFCW Local 99 Arizona
The Arizona Credit Union League, and Mi Familia Vota.

www.NoMoreLoanSharks.com

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