RUSTON, LA – Ruston, LA, small businessman Mickey Mays has spoken out against proposed new regulations being drafted in Washington, which he said would shut down his business – and thousands like his nationwide.
Mays, along with six other “Small Entity Representatives” (SERs), sent a letter to Sen. David Vitter, Chairman of the U.S. Senate Committee on Small Business and Entrepreneurship, and Rep. Steve Chabot, Chairman of the U.S. House Committee on Small Business, on Tuesday, August 11, 2015, which identified multiple concerns with the process used by the Consumer Financial Protection Bureau (CFPB) to examine the impact of the bureau’s new payday lending regulatory proposals on small businesses like theirs.
Mays and his fellow SERs were selected to sit on a required small business panel set up to advise Washington regulators on the impact of their regulations on small businesses. In this case, the panel was formed to focus on the impact of draft federal regulatory proposals about payday loans.
The group of small business representatives told the panel the CFPB’s proposal would result in 59-84% revenue declines for these representatives’ businesses. This would mean these small businesses would close, their employees would be laid off and the customers who depend on them for short-term credit would be left with no other alternatives.
They also identified an apparent lack of understanding of how state regulatory authorities and lenders already work together to protect consumers.
Mays formerly served as Chief Operating Officer of a national bank. Now, Managing Partner of Ruston, LA-based payday lending company Thrifty Loans, he oversees 23 stores in Louisiana and Texas.
The SER’s letter reads:
The Honorable David Vitter, Chairman
Committee on Small Business & Entrepreneurship
U.S. Senate
Washington, DC 20510
The Honorable Steve Chabot, Chairman
Committee on Small Business
U.S. House of Representatives
Washington, DC 20515
Dear Chairmen Vitter and Chabot: August 11, 2015
We are writing to you regarding a payday lending proposal that the Consumer Financial Protection Bureau (CFPB or Bureau) is currently developing. We hope to enlist your leadership in Congress to protect and empower American small businesses and prevent the CFPB from ignoring our views, perspectives, and input as the Bureau moves towards a rulemaking.
Last spring, the CFPB selected us as "Small Entity Representatives" (SERs) under a law your Committees oversee – the Small Business Regulatory Enforcement Fairness Act (SBREFA). In March, the CFPB issued a 57-page outline of how the Bureau intends to regulate our businesses on a federal level. We worked with the Office of Advocacy at the U.S. Small Business Administration (SBA) and participated in several conference calls hosted by CFPB that included officials from the Office of Information and Regulatory Affairs (OIRA) at the White House Office of Management and Budget, as well as SBA. We also traveled to Washington, DC for an all-day meeting with the CFPB and other SBREFA panel members on April 29th at the U.S. Department of the Treasury. We organized our suggestions in writing based on these meetings and submitted them to the CFPB in May.
Under SBREFA, the CFPB has 60 days to consult with SBA and OIRA and to complete a Final Report of the Small Business Review Panel. The CFPB has chosen not to release the Report publicly and, instead, will wait to publish the Report when the Bureau issues a proposed rule. However, now that the Report is final, we believe it is appropriate to voice our concerns with the process and make public our participation in SBREFA.
Admittedly, it was difficult to engage constructively with the CFPB when the first written material we received from the Bureau did not have any small-business specific data and predicted that the regulatory proposal would result in 59-84% revenue declines for our businesses. In fact, many of our fellow lenders believe the CFPB is trying to eliminate the payday lending industry and only conducted the SBREFA process to try to prevent its regulation from being overturned in court. Despite these negative circumstances, we felt strongly that, if we did not participate in SBREFA, federal regulators would proceed without understanding how we operate. The potential result would be eliminating small businesses from the short-term lending market and depriving our customers of credit when they need it most. We understood that the SBREFA amendment in Dodd-Frank, championed by former Senator Olympia Snowe, then Chair of the Senate Small Business & Entrepreneurship Committee, relies on the participation of small businesses like ours. We therefore dedicated the time and effort required to represent payday lenders, spoke on behalf of our customers, and tried to educate the CFPB on the impact its proposal would have.
From the start, we tried to impress upon the CFPB that each of our businesses is regulated by the states in which we operate. We were frustrated that the Bureau apparently lacked an understanding of how state regulatory authorities work with us to protect consumers. It was even more frustrating that Bureau officials could not identify failings in the state regulatory framework that would prompt a federal overlay of new regulatory obligations, and that Bureau officials admitted they had not even analyzed the existing state programs. We frequently asked officials from the CFPB how they planned on making federal regulations compatible with state requirements and the answer we received was, “… we will analyze how state laws will be impacted by the CFPB regulation…” [paraphrase]. That type of response did not make sense to us because we were asked to provide input on a proposal without the CFPB telling us how their regulation would coincide, duplicate, or conflict with requirements that currently govern our lending practices, depending on the states where we operate.
We were also frustrated by the lack of appreciation the CFPB seemed to have for our customers and the relationship we have with them, which is the foundation for our business. When customers come to us, it is often because there is no other place for them to go. Many of our customers come to us after banks and credit unions have turned them down. The CFPB falsely assumed that if our stores close, our customers would simply go elsewhere for credit. That is not the case. We worry that the CFPB does not understand this critical fact: if the CFPB proposal advances, our customers will fall victim to unregulated and unlicensed lenders and inferior forms of credit.
As the SBREFA process unfolded, the Community Financial Services Association (CFSA) hired Charles River Associates (CRA) to study how the CFPB’s proposal would impact payday lending. CRA used two years of financial data from 234 small business stores and 150,000 consumers. The median loan was $255 with a 14-day term and a $45 fee. CRA’s analysis of the CFPB’s proposal showed an 82 percent decline in revenues. Under that scenario, we would all be forced to close our stores and lay off our employees. Significant job losses would be rampant not only across small businesses but throughout the industry, as even large companies would be forced to consolidate stores or shut them down completely. Equally concerning, our customers would have nowhere to go for short-term credit.
We spent a great deal of time educating the CFPB about how we operate our small businesses and the novelty of relationship-based lending, as well as describing our customers and their financial needs. That time will be worth the effort if the CFPB listens to our suggestions and incorporates our concerns into its approach for federal regulation of our industry. We requested that the CFPB reconvene the SBREFA process once it completes an analysis of existing state regulations and how its proposal will operate consistently with those requirements. Additionally, we requested that the CFPB provide an actual assessment of the impact on small lenders, as well as the cost and availability of credit to small businesses. Thus far, the CFPB has not responded to our request.
We appreciate your steadfast defense of small business and we ask that you make sure the CFPB proceeds in a way that bolsters our ability to provide needed short-term loans for our customers.
Sincerely,
Mickey Mays
Managing Partner
Thrifty Loans, LLC, Ruston, LA
Bob Zeitler
CEO/Owner
PH Financial Services, Fenton, MO
Daniel C. Gwaltney
Chief Financial Officer
Payday Loan, LLC, Anaheim, CA
Brandon Payne
Manager
Payne’s Check Cashing, Culpeper, VA
Judi Strong
President and Owner
Cash In A Dash LLC, Lexington, KY
Paul M. Hoffer
Owner and Chief Financial Officer
Express Cash Management, LLC, Wausau, WI
Brian Lynn
President
Speedy Cash, Inc./Lending Bear, Jacksonville, FL
Cc: The Honorable Howard Shelanski, Administrator, Office of Information and Regulatory Affairs Claudia Rayford Rodgers, Acting Chief Counsel for Advocacy, U.S. Small Business Administration
