Filene Fill-In Ep. 39: What’s the real issue with small dollar loans?

Filene Research Institute

Interview: Ben Morales, Chief Technology and Operations Officer at Washington State Employees Credit Union and CEO of QCash Financial -- about the real issue behind small-dollar lending. The Federal Reserve surveyed more than 5,000 people to see if their personal financial situations were improving along with the economy, and about 46 percent of them said they did not have enough money to cover a $400 emergency expense. That got me thinking about all the noise we’re hearing today about payday lending regulations, exemptions for credit unions and community banks, sensible regulations, payday lending alternatives and whatever the heck is happening with the CFPB… Meanwhile -- There are 28 states in the US today with "permissive" regulations governing payday lending. In these states, the APR of payday loans typically ranges from 391% to 521%. And those 46% of Americans that can’t cover an expense of just $400 in an emergency? They can’t wait around for rules and regulations to be worked out to help protect them. They really don’t have many options. So… I really wanted to know more about what is the issue with small dollar lending. I wanted to know more about not just the dark side of predatory lending, but what is driving the need and how could credit unions become a welcome respite for consumers swimming over their heads in an ocean full of predators. Or maybe that metaphor’s a little too dark… But to address the issues politically and logistically -- issues related to risk and regulation, and business opportunity – issues around the consumer need, and the feasibility and viability of offering solutions to this very real problem—to learn more about all of these questions I had, I invited an expert in the topic to share with me. Ben has essentially made it his life’s work to address the question of “what’s the real issue of small dollar loans” so he is the right person to ask my questions and we’re fortunate to him lend us his expertise. If you’re curious to learn more, then listen in, we’re about to dive into the ocean…