Executive: Proposed federal payday loan rules could cost Wichita jobs

New federal rules proposed last week for payday lenders could have an adverse impact on a major Wichita employer, according to the company’s chief operating officer.

Bill Baker of Curo Financial Technologies – the Wichita-based parent company of Speedy Cash – said a proposed rule announced June 2 by the Consumer Financial Protection Bureau could ultimately affect the more than 600 employees the company has at its Wichita headquarters and call center.

The rules would mandate that payday lenders consider borrowers’ ability to repay loans and limit the number of repeat loans offered to the same party.

While the changes may not manifest until as late as 2018, Baker said they could significantly alter the way lenders like Speedy Cash do business, which he said could lead to job cuts at Speedy Cash’s parent.

“We were disappointed with what they issued,” Baker said. “Largely, what we in the industry believe it does is it cuts off access to short-term credit. One thing these rules can’t regulate is demand.”

“In states where prohibitive legislation has been put in for short-terms loans, we’ve seen customers turn to overdraft protection, which is far more expensive, or, worse yet, we’ve seen them turn to unlicensed lenders. Those avenues are almost always more expensive.”

‘Debt traps’

It a seven-page release detailing the proposed rules, the bureau refers to payday loans as “debt traps” aimed at financially vulnerable consumers. In addition to payday loans – which are generally due on the borrower’s next pay period – the changes would also cover auto title loans, deposit advance products and certain high-cost installment loans, according to the bureau.

The concern by those who have been pushing for stricter lending rules is that loan recipients can sometimes end up repaying many times what their original loan amount was because of high interest rates.

In a Kansas City Star editorial published last week, the board called the industry’s assertion that such rules would dry up short-term loan availability to those who might need it “outrageously misleading.”

‘We don’t want to see credit turned off’

Baker, however, said the 1,300-page rules proposal would actually be harmful to consumers seeking short-term credit.

“We’re not against having regulations that make sense at the federal level,” Baker said. “The biggest thing is that we don’t want to see credit turned off to people that have nowhere else to turn.”

“Our customers understand the process and the product,” Baker said. “I think a lot of the folks making the regulations and making a lot of the comments in the media – even some consumer advocates – are people who have never had to take a short-term loan. There’s a delta between the reality and the messaging out there.”

Once the proposed rules are published in the Federal Register, anyone wishing to comment on the proposal can do so during a 90-day comment period. Public comments will be accepted until Sept. 14, according to the bureau.

“Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt,” Richard Cordray, director of the Consumer Financial Protection Bureau, said in a news release. “By putting in mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail.”

According to bureau numbers, storefront payday lenders received approximately $3.6 billion in fee revenue in 2015 while online lenders received $3.1 billion.

“There’s a misnomer that we give very little consideration to a customer’s income and ability to repay,” Baker said. “We build sophisticated algorithms to predict people’s ability to repay. If we lend somebody $500 and they don’t pay us back, that’s not good for anybody.”

This story was originally published June 7, 2016 at 4:57 PM with the headline "Executive: Proposed federal payday loan rules could cost Wichita jobs."