If you’re in dire financial straits because you thought you could take out a 275% APR payday loan only to find yourself unable to repay, do you want credit counseling advice from someone with a financial interest in the success of payday lenders? Probably not, but the founder of Consolidated Credit Counseling Services, Inc. says that his investments in the payday loan business had no bearing on his work.
The Wall Street Journal reports that Howard Dvorkin, founder and former president of the non-profit Consolidated Credit Counseling Services Inc. — which claims to have aided millions of Americans in reducing their debt and working through the bankruptcy process — owns interests in companies that provide services to payday lenders, including at least one that offering payday loans as recently as 2012.
Another company in which Dvorkin allegedly has a stake helped to set up collaborations between payday lenders and Native American reservations.
One business, started at Dvorkin’s home in 2010, provides loan-management software used by payday lenders. In 2014, this company was granted a patent for software with a feature called the “bounce-bounce process,” that — according to the Journal’s description — takes defaulted loans and adds a financing fee while simultaneously sending the bill for the fee to a debt collector.
The company’s president tells the Journal that this is actually a pro-consumer feature that preempts additional scheduled payments from being taken from borrowers who have missed two consecutive payments.
For his part, Dvorkin says that the
company only provides the software to lenders and doesn’t have any involvement in the loans.
“It’s their data. What they do with it, I couldn’t tell you,” he explains. “It’s software. It doesn’t deal with consumers. It has no interaction with anyone but other technologists.”
Regarding his investments, Dvorkin tells the Journal that, “We’re not in the payday-loan business, period.”
His stance is that while he’s invested in businesses, he has no control over those companies and thus can’t be familiar with everything that goes on there.
“There could be some people that could say, ‘Wow, that’s weird.’ But I don’t really have any involvement whatsoever in those businesses,” he explains, later adding, “I expect the management teams to ethically operate these businesses while strictly adhering to the law.”
While Dvorkin has previously publicly decried payday loans, saying they charge “outrageous” interest rates, he now tells the Journal that “there is a place” for these short-term, high-interest loans for borrowers without other options.
Dvorkin, who founded Consolidated Credit Services in 1993 and watched it grow to a multimillion-dollar operation, left the company in 2013 but still has ties to Consolidated as president of a business that provides call-center services for the company.
While the Journal report claims that there are 40 Dvorkin-associated companies using the same mailbox at UPS store in a Florida strip mall, Dvorkin says his focus is now on Debt.com, which connects consumers with services offering things like debt consolidation and credit counseling.
Category: Payday loans