Professor Nathalie Martin Testifies before U.S. Senate Banking Committee, Housing, and Urban Affairs Subcommittee

April 9, 2014

Professor Nathalie Martin

Professor Nathalie Martin testified before the United Sates Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Financial Institutions and Consumer Protection, on March 26, 2014 in connection with a hearing entitled “Are Alternative Financial Products Serving Consumers?”

You can view the entire webcast here: [view archive webcast]

Martin has conducted five empirical studies related to high-cost lending and attitudes toward high-cost lending.

The conclusion for her testimony states that based upon years of research and a great deal of contact with low-income consumers, Martin believes people are better off without the option to take out unlimited numbers of high-cost loans. This is especially true when current law in most states allows lenders to charge 1,000% per annum or more in interest and fees. These forms of credit cause far more harm than good. They are not safe, not affordable, and thus access to them is more of burden than a benefit.

These loans make cash flow problems worse. The two ways to eradicate cash constriction are to increase income or reduce costs. These loans increase costs and thus worsen the problem of limited income to meet expenses. If these loans cannot be made more affordable, the loans should not be made.

Moreover, as long as these forms of credit are around, alternatives for low and middle income people with poor credit will not be become available. Where the loans are legal, high-cost lenders are everywhere, outnumbering Starbucks, McDonald’s, Burger Kings and Walgreen’s combined. With no underwriting, they are easy (too easy) to access. As long as these lenders are in business under the terms described here, it will be difficult for states and the federal government to develop lower cost alternatives.