Trillium Submits Comments to Consumer Financial Protection Bureau Regarding Payday Lending

In January 2012, the Consumer Financial Protection Bureau (CFPB) convened a first-ever field hearing to gather information and input on the payday lending market. With the establishment of the CFPB, a federal agency for the first time can supervise not only bank payday lenders but also all nonbank payday lenders. The initial hearing coincided with the publication of the Bureau’s Short-Term, Small-Dollar Lending Procedures, an internal document that CFPB examiners will use to make sure payday lenders, banks and nonbanks alike, are following federal consumer financial laws.

After the hearing, the CFPB invited the public to review the hearing transcript and provide comments on the issues raised in it. As concerned investors, Trillium responded to the request.

“Based on our research of the effects that payday loans and similar financial products like ‘direct deposit advance loans’ have on consumers, we believe that the risks posed to investors by the presence of such products in the financial marketplace are potentially severe,” said Seth Magaziner, Financial Sector Analyst at Trillium.  “While payday lending may be a profitable businesses activity in isolation, our analysis suggests that the cycle of debt and increased likelihood of bankruptcy that the high costs of payday products impose on consumers have a negative net impact on the broader economy that will tax the long term returns of a diversified investment portfolio.”

Trillium’s complete comments can be read here.