June Whitepaper Covers Payday Lending Databases
AFSA’s State Government Affairs Team recently published a white paper covering payday lending databases. The paper highlights state efforts to create databases of outstanding loans for payday lenders and the issues associated with these databases when extended to other forms of credit, including traditional installment loans.
Lawmakers across the country have turned to payday lending databases as a way to protect consumers from predatory lending practices. Importantly, all existing state databases are operated by a single company, Veritec Solutions. Veritec is also the primary advocate to create these databases, which raises concerns of a conflict of interest, as some database laws allow database providers to charge state governments fees to use the database.
In addition to the problematic conflict of interest, these databases are concerning when states seek to expand them to include traditional installment loans, which has already occurred in Illinois and Nevada and has been proposed in other states. Unlike payday lenders, traditional installment lenders report to established credit reporting agencies so these databases do not provide any additional consumer protection. Expanding databases to installment loans is unnecessary and overly burdensome, creating additional compliance costs for an industry that is already well-regulated and recognized as a safe and affordable alternative to payday loans.
The white paper explores Veritec’s lobbying efforts to create these databases. In addition, it highlights Veritec’s indirect efforts to promote the payday lending industry, since the company benefits from a larger market for payday lenders. The white paper also provides an overview of the states with existing payday database laws.
The paper is also available under the State Resources section of AFSA’s website.
June 8th, 2021 by Dan Bucherer