Community organizations call on Lone Star Funds to stop predatory payday lending
Yesterday, 31 consumer advocacy and fair lending organizations sent a letter to Lone Star Funds calling on the manager to end predatory payday lending. The letter calls for fair lending practices at Lone Star Funds’ DFC Global, a major payday lender.
The full letter can be found below or at www.LoanSharkFunds.org.
Lone Star Funds purchased payday lender DFC Global through its Lone Star Fund VIII vehicle in June 2014. Through DFC’s Money Mart and Check Cashing Store brands, Lone Star Funds and its limited partners profit from abusive lending practices that trap borrowers in a cycle of debt. DFC Global has advertised loans with APRs of over 300% in some states.
In their letter, advocates call on Lone Star Funds to require DFC Global to abide by the Federal Deposit Insurance Corporation’s Small-Dollar Loan Guidelines, which suggest common-sense standards for these types of consumer loans.
“Today, we’re calling on Lone Star Funds to stop trapping borrowers in a cycle of debt,” said Gynnie Robnett, campaign director at Americans for Financial Reform. “Lone Star and its investors should not be profiting from abusive practices.”
The letter is also being sent to several of Lone Star Funds’ key public employee pension fund investors, many of which own DFC Global through their interest in Lone Star Fund VIII.
Lone Star Funds: Stop Predatory Payday Lending!
Lone Star Funds
2711 North Haskell Avenue
Dallas, TX 75204
Dear Mr. Collin and Lone Star Funds investors:
We are troubled to learn about your purchase of DFC Global, a major payday lender and pawnshop operator.
Through its investment in DFC Global, which operates US payday lending outlets under the Money Mart and Check Cashing Store brands, Lone Star Funds and its limited partners profit from abusive lending practices, including interest rates of 300% and more, and loans that trap borrowers in a cycle of ever more burdensome debt. Outside of the US, DFC companies have advertised APRs as high as 33,000%.
Payday loans often cause a cascade of devastating financial consequences that include lost bank accounts, delinquencies on credit cards and other bills, and bankruptcy. Payday loans take borrowers already in dire circumstances and leave them even worse off.
In fact, payday loans like those Money Mart and Check Cashing Store sell are so harmful to consumers that they are illegal in many states. In 2007, the Federal Deposit Insurance Corporation issued Affordable Small-Dollar Loan Guidelines which suggest common-sense standards for these types of consumer loans, including limiting APRs to no more than 36%. The FDIC also advises limiting any time spent in a payday loan to 90 days within a twelve-month period. DFC’s practices are grossly inconsistent with these advisories.
Lone Star Funds has received billions of dollars in commitments from public employee pension funds, a number of which are in states that sharply limit predatory payday loans. We urge Lone Star Funds and its limited partners to require DFC Global to adopt guidelines for small dollar loans along the lines of the standards put in place by the FDIC, both in the United States and abroad. If DFC is unwilling or unable to abide by these standards, we ask that you exit your investment in the firm.
AFL-CIO Office of Investment
Alaska Public Interest Group
Americans for Financial Reform
Arkansans Against Abusive Payday Lending
Birmingham Faith in Action
California Reinvestment Coalition (CRC)
Center for Economic Integrity – Arizona Office
Center for Economic Integrity – New Mexico Office
Consumer Assistance Council
Consumers Council of Missouri
Consumers for Auto Reliability and Safety
Delaware Alliance for Community Advancement (DACA)
Delawareans for Social and Economic Justice (DSEJ)
Florida Alliance for Consumer Protection
Jesuit Social Research Institute
Massachusetts Consumers Council
National People’s Action
New Jersey Citizen Action
Sisters of Mercy
Tennessee Citizen Action
United Way Silicon Valley
Virginia Citizens Consumer Council
Investors in Lone Star Fund VIII:
Ms. Katherine J. Durant
Chair, Oregon Investment Council
Lt. Samuel Friar
Chairman, Dallas Police and Fire Pension System
Mr. Lon Roberts
Chair, State of Wisconsin Investment Board
Ms. Mary Lou Cameron
Chairperson, New Mexico Educational Retirement Board
Mr. Todd E. Clark
Chairman, Houston Firefighters’ Relief and Retirement Fund
Other key Lone Star Funds investors:
Mr. R. David Kelly
Chairman, Teacher Retirement System of Texas
Mr. Robert Lawyer
Board Chair, Teachers’ Retirement System of Louisiana
President of the Retirement Board, New York State Teachers’ Retirement System
Mr. Tony Smith
President, Teachers’ Retirement System of the State of Illinois