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WASHINGTON, March 26 /PRNewswire-USNewswire/ -- NewsBusters, a media watchdog organization dedicated to exposing bias in the media has taken Reuters reporter Nick Carey to task for last Monday's story entitled: "Pay day" loans exacerbate U.S. housing crisis.
NewsBusters' media critic Matthew Vadum writes that the "Reuters article treats all payday borrowers as victims, oppressed by America's evil capitalist system. Carey bases his article almost entirely on anecdotal evidence and on statements by activists with an axe to grind: apart from the borrowers themselves, every single person or group quoted in the article is at the left end of America's political spectrum."
One of the critics the Reuters reporter quotes is from the Center for Responsible Lending (CRL). This is ironic because payday lending is not even mentioned in CRL's online information about the subprime mortgage meltdown. It seems that Nick Carey made up his mind that payday lenders are partly to blame for the mortgage crisis, and CRL was all too happy to go along regardless of the truth. Here is the CRL website:
http://www.responsiblelending.org/issues/mortgage/subprime-mortgage-crisis .html
"While it's become fashionable to blame payday lenders for all of society's ills, it is preposterous and irresponsible to blame a $300 loan for the nation's mortgage crisis," said D. Lynn DeVault, president of the Community Financial Services Association of America (CFSA). "NewsBusters hits the nail right on the head. There is absolutely no evidence connecting the payday lending industry to the subprime mortgage meltdown. This is why the reporter only asked people who he knew would agree with his baseless hypothesis."
If the Reuters reporter Nick Carey, had done his homework or was interested in even a semblance of balance to his story, he would have cited a new study which found that payday loans may actually helps people remain in their homes. This research by Adair Morse of the University of Chicago found that the existence of payday lenders significantly offset the increase in foreclosures in times of natural (and potentially personal) disaster.
Another study contradicting the Reuters piece is one which found that payday loans may actually help consumers avoid bankruptcy. Preliminary findings by Federal Reserve Bank of New York Research Officer Donald P. Morgan and Cornell University graduate student Michael R. Strain found that in states where payday loans were banned, consumers filed for Chapter 7 ("no asset") bankruptcy at a higher rate.
Besides failing to contact CFSA for a quote, Nick Carey didn't fact check the quotes given to him by our known critics. Take the accusation by the Center for Responsible Lending (CRL) that the average customer pays $793 for a $325 loan. This is absolutely wrong. To come up with that number, CRL counts the principal for only one loan but adds the fees for nine loans - an impossible scenario under state laws that regulate payday lending. In fact, Veritec Solutions LLC, the regulatory services company which provides loan transaction data to state agencies, has publicly said that CRL misinterpreted the data to reach flawed conclusions.
Lastly, another obvious point missed by the Reuters reporter is the difference between the pages and pages of fine print associated with a home mortgage and the poster-size display of loan costs prominently placed in every CFSA store. This ensures that payday loan customers know, in simple terms, exactly what the fees are before they enter into any transaction.
You can read the entire NewsBusters post at: http://newsbusters.org/blogs/matthew-vadum/2008/03/26/reuters-news-flash-lende rs-keep-lending-money-poor-people
About the Community Financial Services Association of America
The Community Financial Services Association of America (CFSA) (http://www.cfsa.net/) is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA's Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers.
Source: Community Financial Services Association of America
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