"....This point leads us back to the Center for
Responsible Lending (CRL), which has led the charge against
payday loans. On March 18, 2008, Forbes.com published an
article on CRL founder and Self-Help Credit Union CEO Martin
Eakes, titled "Subprime's Mr. Clean: Martin Eakes' Campaign
to Straighten Out Subprime Lending Has Some Wrinkles." The
article argues that Eakes's leadership of a credit union
creates a conflict of interest with regard to CRL's
activities. The article cites quotes economist Donald
Morgan:
"Who then benefits from payday loan bans? Credit
unions, for one, notes Morgan. He says interest rates on
overdrafts charged by credit unions and banks can exceed
2,000 percent, dwarfing the high interest rates on
payday loans. Credit unions, he adds, have been
especially hurt by payday lenders cutting into their
overdraft fees."
Forbes.com notes that in payday-loan free North Carolina,
a state in which CRL and Eakes were instrumental in
outlawing payday loans, Self-Help has thrived. Its assets
have jumped from $114 million in 2003 to $292 million in
September 2007 and its return on average assets was 1.4
percent, versus the industry average of 1.1 percent." (note
5 ). This casts a new light on CRL's positioning as a public
interest group that engaged in consumer protection
activities. Journalists may have difficulty in calculating
implied interest rates, but a conflict of interest is
something they can understand."
The STATS study concludes that press coverage of the payday loan
industry "reflects an insufficient understanding of interest
rates and other financial data." The study also concludes that
some news reports of stratospheric interest rates in the payday
loan industry do not withstand closer scrutiny.
This casts a new
light on CRL's positioning as a public interest group that
engaged in consumer protection activities. Journalists may have
difficulty in calculating implied interest rates, but a conflict
of interest is something they can understand.