Happy Holidays And New Year
The Payday Hound wishes you and your families a most wonderful New Year.
This year brought many changes to the payday lending landscape. In our opinion, the biggest impact was made by the NY Attorney General. Their cease and desist letter to payday lenders making loans in NY brought a lot of press but we believe real change was made by the request to ACH processors to stop working with bad lenders. Many of these bad lenders took advantage of people already in a tough spot. For example, when full payment could not be made a lender would break down ACH withdrawals into numerous small amounts and hit a person's account multiple times a day resulting in numerous fees to the consumer both from the bank and the payday lender. By working with ACH processors the attorney general helped target bad payday lender's payment infrastructure. The Payday Hound estimates roughly 30%-50% of payday lenders stopped their marketing and many lenders shut down entirely. It's important to note that almost 100% of these lenders were either off-shore or tribal lenders. State licensed lenders continue to operate. We think this cleanup process is great for the industry overall.
We have also seen the beginning of a shift away from one-time payday loans to longer-term installment loans. This has occurred as regulators continue to scrutinize payday lending. We have seen new players enter the installment lending space as state-licensed lenders. We are encouraged by this and believe additional options are good for customers and hope the additional competition will bring lower pricing for borrowers.
In 2014 we look forward to continued improvements. We hope there will be increased transparency, improved regulations, and clearer guidelines. Clear, robust rules encourage legitimate payday and installment lenders to compete on price and service. We hope new players will continue to enter the space and that they will bring innovative products and services. Ideas such as finding other measures of credit risk or propensity to pay such as social networks, lenders working with employers to create small emergency advances, or lenders finding other sources of collateral such as retail loyalty points all sound promising to us. We look forward to 2014 and all that it brings.
We hope the new year brings you lots of love, peace, and joy.