Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 5, 2012

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Pro-regulatory and pro-lender factions in the payday loan war continue to duke-it-out across the country. As one county gets new zoning laws or one payday loan lender backs a victorious political candidate, it is easy to forget that this war is a two-sided argument since news stories tend to be so one-sided. The media almost always covers tragic stories of borrowers who end up in massive debt traps rather than telling the story through an unbiased lens. While shedding light on payday loan victims isn’t inherently unbiased, refusing to cover the topic from the other side’s point-of-view is. Gaining the perspective of the lenders in this billion dollar war can show that payday lending has merits of its own and that “victories” against the industry may be hollow at best.

Battlefronts Reexamined

Despite the success of certain cities, counties, and states in banning payday lending, the payday lending industry is not fazed by what many consumer advocacy groups consider to be massive victories.

“There has been a trend of municipalities, cities and towns trying to regulate the alternative financial services industry by way of zoning. There have been some cases that have been published of late where these attempts were found to be in violation of the state’s own laws. When municipalities try to regulate a legal industry out of business, it often does not work out as planned,” said Cindy Vega from Financial Service Centers of America (FiSCA) in an interview with

Vega highlighted how in Long Island, NY, a town tried to zone several financial service centers out of the city’s best areas. However, a lawsuit filed by the targeted businesses managed to make its way to the state’s Supreme Court. The city was defeated since state law superseded local laws.

As gleeful as pro-regulatory factions may be in having entire states ban payday loan lending, lenders themselves claim to be perfectly comfortable operating in a regulated environment. Even if business is banned in one state, there are still a handful of others with open arms.

Jamie Fulmer, Senior Vice President of Public Affairs at Advance America, explained how payday loan companies not only adapt to regulation, but sometimes welcome it.

“Advance America has always operated in a regulated environment at state and federal levels. Each of our locations in 29 states operates in a very specific regulatory environment. There have always been a number of federal regulations at the federal level. We are very comfortable in a regulated environment. A balanced regulatory approach is one that’s good for consumers because it preserves their access to credit while offering sensible protections,” Fulmer said in an interview with

Lawful in the Lawless Internet

While regulations at the city, county, and state level are easy to police, in the online world they are far from manageable. In fact, foreign lenders have even taken to going online to set up business operations that do not bar residents of certain states from applying. Fortunately, not all lenders are so quick to disregard the law online.

 “All online products are done so in compliance with state laws. Regulated payday lending products taken away from consumers lead to offshore illegal internet lending. Consumers pay more for unregulated online payday loans since there are no rules online. Consumers can’t seek remedy from state regulators if they haven’t been treated fairly once they borrow an illegal online payday loan,” said Fulmer.   

Interestingly enough, even if a state bans payday lending, some financing companies may still operate in that state but only by offering non-payday loan products.

“FiSCA members are multi-line providers. They offer a wide variety of financial products and services. Check cashing, bill payment, prepaid debit card sales. FiSCA members operate throughout the country. Not all of them offer small-dollar loans. They operate under state laws and regulations,” said Vega from FiSCA.

Everyone Plays Ball

News stories often tout that payday lenders throw money at politicians in order to get their own agenda pushed forward in legislation. However, both industry representatives and lenders are quick to point out that they are merely participating in the democratic process much the same way all other citizens and industries do.

“FiSCA’s concerns and issues are bipartisan. FiSCA’s goal is to educate lawmakers on both sides of the aisle about how laws and regulation could impact their constituents. Any campaign contributions made by, FiSCA are made in accordance with the law, and support elected officials who understand the critical role our industry plays in the daily lives of millions of consumers” said Vega.

Likewise, Advance America has also eagerly celebrated the practice of supporting political candidates.

“Advance America is no different than any other company. We participate in the political process just like anyone else. We think it is important we have the ability to express our perspectives and concerns,” said Fulmer.

This very same participation in the political process draws criticism that, much like Big Tobacco or Big Oil, the payday loan industry “lines the pockets of politicians” to get what it wants.

However, the industry remains defiant against these allegations and other statements by consumer advocacy groups that they are little more than loan sharks offering products with usurious interest rates.

“Consumer protection is very important to FiSCA and its members. Equally important is a true understanding of loan products and how they work. If you look into the research, peoples’ ability to pay and repay loans is dictated by their financial situation and not the interest they are being charged. A lot of arguments about interest rates and rollovers is really moot,” said Vega.

“There is a lot of misinformation about loans and how they work” she continued.

The research cited by Vega was a study performed by Arkansas Tech University and the Cypress Research Group. It found that, even when given interest-free payday loans, some borrowers, through their inability to manage money, would fail to repay the amount. In effect, the interest rate had nothing to do with whether or not a borrower repaid the payday loan. It seems some people simply do not have enough income to cover their expenses.

“Consumer groups may not like us but our customers have a very high opinion of our products. Internal studies show extremely low rates of complaints. There’s an unfortunate disconnect. Our customers would benefit most in having a discussion about how we can all work together to find ways to best serve the needs of consumers. Simply throwing around empty rhetoric is not the best way to have that discussion,” said Fulmer.

Paper-thin Advantages

Pro-regulatory groups have long sought to deal a blow to tribal-affiliated payday loan lenders. Thanks to the level of immunity that tribal-affiliated lenders enjoy, their operations are able to skirt the law in many situations. While some lenders are quick to “jump in bed” with Native American tribes, not all companies take advantage of this unethical practice.

“FiSCA members are not affiliated with tribal lending operations,” said Vega. “FiSCA members are required to operate within state and federal regulations. That makes them distinct and separate from tribal lenders. Tribal lenders claim that tribal laws supersede government regulation.”

Legal immunity or not, customers still face risks when borrowing money online and offline from either tribal or non-tribal affiliated lenders.

“I would say that consumers may have more protections when they use lenders that are following state and local regulations. Look at consumer complaints and you will see that the number of complaints per number of loans made is minute which points to the fact that consumers appreciate this much needed service. The rate of complaints against tribal lenders is significantly higher,” said Vega.

Advance America, on the other hand, simply shrugs off tribal-affiliated companies as just another rival in a broad market.

“We compete with a wide array of lenders, whether they are depository institutions like Bank of America, or tribal organizations or those partnering with offshore entities. We compete in the marketplace broadly. We feel comfortable in a marketplace that is regulated at a state level and also a federal. We believe we compete very favorably with all rivals in a way that provides service to our customers,” said Fulmer.

While most payday lending companies operate within the confines of state and federal regulation, their tribal-affiliated peers may continue to spoil the industry’s reputation if they continue to avoid such regulation.

If these “bad apples” continue to increase, reports of governments increasing regulation against lenders—or at least attempting to—will also increase. Both the pro-regulatory and pro-lender sides of the payday loan war can at least agree that it is of great comfort that law-abiding companies such as Advance America and trade groups like FiSCA advocate for competition within the framework of the law. Lawless online lenders (and even tribal-affiliated ones) should bear the brunt of consumer advocates’ focus as the billion dollar payday loan industry continues to expand into the new 2013 year.