The Payday industry trade group Consumer Credit Research Foundation (CCRF) paid for a 2011 study conducted by Arkansas Tech University and edited it to fit their purposes, according to the Campaign for Accountability (CfA) report, Academic Deception. The records released by the CfA report show that the CCRF paid Professor Anthony Fusaro at least $39,912 to author a report titled “Do Payday Loans Trap Consumers in a Cycle of Debt?” and co-author Dr. Patricia Cirillo directly billed the CCRF for report costs. The report’s conclusion? Payday loans are not responsible for creating a “cycle of debt.”
The reality is, however, that more than three quarters of payday loans are taken out within two weeks of previous payday loan, and the industry generates 75% of their fees from borrowers with more than 10 loans a year—people firmly ensnared by the debt trap. And the reality is that payday loans are associated with other harms such as increased likelihood of bankruptcy, delinquency on on other bills, and bank account closures. In fact, Miller had said to Prof. Fusaro that “in practice, consumers mostly roll over or default; very few actually repay their loans in cash on the due date.” In other words, the CCRF used funds made off payday borrowers caught in a cycle of debt to produce ‘independent research’ that such a cycle didn’t exist at all.
Released emails show that Mr. Miller had Dr. Cirillo cut her finding that payday loan borrowers often have massive debit card overdrafts the month before seeking payday loans, and instructed them to remove any reference to the role played by representatives of the payday industry in the creation of the report.
This follows on the heels of similar scandals, like the resignation of Robert Litan at the Brookings Institute for brokering industry-funding of a supposedly independent study. And, the Arkansas Tech scandal doesn’t sit well with the press, the Huffington Post wrote two articles criticizing the study and the industry, and Politico also covered the controversy.
While it is one thing for a predatory lending industry to send out press releases with half-truths and outright lies, it is another for Academic Institutions to taint academic integrity by shilling for special interests. The CfA also filed requests for documents with several other universities that have produced similar pro-industry studies, including Kennesaw State University, George Mason University, and the University of California, Davis, but so far have stoned walled those requests. So this may be just the top of the iceberg.
As the Consumer Financial Protection Bureau drafts a rule to regulate payday lenders, lenders have been scrambling to mount a defense against accusations that payday lending is an industry predicated on sucking consumers into a debt trap. But no amount of industry airbrushing can conceal the fact that payday lending is predicated on preying on vulnerable consumers without a means of paying back their loans.