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July 9, 2008

“Responsible Lending” Scam Exposed

It’s not surprising to find an ulterior motive lurking behind many of today’s for-your-own-good campaigns. America’s obesity “epidemic” is making billions for the diet industry. Organic-food activism is more lucrative than ever for organic food companies. And trial lawyers are turning menu labeling into the goose's proverbial golden eggs. Protecting us from ourselves has never been more profitable. And the smear campaign against the payday lending industry is no exception.

Just to recap, the state-by-state paternalist power-grab against payday lenders goes something like this. Bash payday lenders for charging “exorbitant” loan fees. (Never mind that payday loan fees aren’t actually excessive and consumers value the service.) Drive payday lenders out of your state with misleading legislation. And finally—most importantly—congratulate yourself publicly on a job well done.  But (nanny) state governments aren’t the only ones trying to whittle down our financial management options.

Take the nonprofit Center for Responsible Lending (CRL). CRL has been a leader in the fight against payday lenders, publishing a slew of reports and opinion pieces slamming lenders for “preying” on their customers. But why lobby against payday lenders if not to collect on Election Day? Like obesity and organics, there’s a big fat pot of gold at the end of the “responsible lending” rainbow:

The Center for Responsible Lending was created [in 2002] by the lucrative Self-Help financial network to attack alternative lenders and boost Self-Help's own share of the short-term loan market…

In 2005 alone [Self-Help’s lending arm] reaped an "excess" - or, profit - of more than $21 million, following its $25 million in 2004 and $16 million in 2003.

Even excluding Self-Help's credit union, the entire syndicate increased its assets by more than a third between 2002 and 2004, amassing a staggering $245 million under its control. That's a quarter-billion-dollar business.

To learn even more about the deceptive Center for Responsible Lending, click here.