2015 Payday Loan Statistics for California

Editor’s note: The Consumer Financial Protection Bureau is finalizing new rules for payday, car title, and high-cost installment loans. They want to hear from YOU about your experiences and recommendations for the loans. Please take two minutes to provide your insights here. 

California Payday Lending Statistics

1) Total Number of loans:  Approximately 12.3 million loans were made in California in 2015 and the aggregate dollar amount of the loans was about $4.2 billion.

2) Average number of loans and average APRs: The average number of loans per customer was 6.5, paying an average APR of 366% (average APR increased 5% from 2014).[1]

3) Repeat borrowers and “churning” of loans: Contrary to loans being advertised as a “one time fix for emergencies” the number of Californians who obtained 10 payday loans (462,334) was far greater than the number who only had one loan (323,870). Subsequent transactions by the same borrower accounted for 76% of the total number of loans made in 2015 with 47% of subsequent loans made the same day a previous loan transaction was paid off and another 23% happening within 1-7 days.

CA DBO new report number of transactions

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics

4) Churning profits: 64% of fees in 2015 ($53.53 million) – came from customers who had seven or more transactions during the year.

Fees collected

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics 

5) Repossessions: 16,989 car title loans resulted in the consumer’s car being repossessed in 2015.[2] At the national level, the CFPB has found that 1 in 5 car title loans ultimately results in a repossession.[3]

6) Fees: California payday loan consumers pay over $507 million annually in payday loans and over $239 million in car title loans.  This ranks California in the #2 spot for highest amount of fees paid for car title and payday loans.[4]

7 Economic drain: Payday lending is an estimated $135 million net drain on California’s economy every year and subtracts 1,975 jobs.[5]

Customers age

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics on ages 

The California Reinvestment Coalition builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner.

You might also be interested in these payday lending posts:

Editorials Against Payday Lenders (As of July 2016, there’s been more than 150 editorials written from around the country about the financial harm caused by these lenders).

Payday Lender Hall of Shame This industry is known for spectacularly shady practices against its consumers. We’ve compiled some of the worst.

8 Reasons Not to Get An Online Payday Loan Is that really a lender’s website you’re on?  Or is it a broker who will re-sell your sensitive information repeatedly?

Data Sources:

[1] CA Dept. of Business Oversight press release, available at: http://www.dbo.ca.gov/Press/press_releases/2016/2016%20CDDTL%20Annual%20Report%20and%20Industry%20Survey%20Press%20Release%2007-06-16.pdf

[2] CA Dept. of Business Oversight 2015 CFLL annual report, available at: http://www.dbo.ca.gov/Licensees/Finance_Lenders/pdf/2015_CFLL_Aggregated_Annual_Report_FINAL.pdf

[3] Consumer Financial Protection Bureau press release, available at: http://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/

[4] Center for Responsible Lending report, available at: http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf

[5] Insight Center for Community Economic Development report, available at: http://ww1.insightcced.org/uploads/assets/Net%20Economic%20Impact%20of%20Payday%20Lending.pdf

Compilation of Payday Loan Legal Settlements

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.
PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

CRC is starting to compile payday loan settlements- if we’ve missed any, please send them to us: SCOFFEY AT CALREINVEST.ORG and we’ll post em here.  And, Advance America has its own post about all their settlements. You can read it here:  ADVANCE AMERICA PAYDAY LENDER SETTLEMENTS

State bars internet lender, wins $11.7M settlement over ‘rent-a-tribe’ loans
CashCall Inc., an internet lender accused of hiding behind an American Indian tribe to break state laws, agreed to pay nearly $12 million to settle charges filed by Minnesota’s attorney general.The company, based in California, was also barred from further business in the state, Attorney General Lori Swanson said Thursday. “The company engaged in an elaborate scheme to collect payments far higher than allowed by state law,” Swanson said in announcing the settlement. CashCall must cancel all outstanding loans, pay back consumers and “undo any adverse reporting to the credit bureaus.” August 18, 2016.

Arkansas AG Settles Payday Lending Lawsuit for $750,000  One of the defendants, a South Dakota based company, identified itself as a tribal entity with sovereign immunity. The company, however, was neither owned nor operated by a tribe. The complaint alleged that the South Dakota lender entered an agreement with a California-based company, pursuant to which it would originate payday loans before assigning them to the California company to collect. July 9, 2016.

Courthouse News Service:  $1.6 Million Settlement With Payday Lenders: Nebraska will accept $1.6 million to settle a predatory lending suit against CashCall and Western Sky Financial, which it accused of falsely claiming tribal affiliation to duck lending laws. (May 6, 2016).

Times Free  Press: Chattanooga payday king justified illegal business by giving money to charity  (May 18, 2016)  A used car salesman turned tech entrepreneur who operated an illegal payday lending syndicate from Chattanooga will pay $9 million in fines and restitution, as well as serve 250 hours of community service and three years of probation, after pleading guilty to felony usury in New York. Carey Vaughn Brown, 57, admitted to New York prosecutors that he broke the law from 2001 to 2013 by lending millions of dollars — $50 million to New Yorkers in 2012 alone — with interest rates well in excess of the state’s 25 percent annual percentage rate cap.

New York Touts $3M Payday Loan Settlement:  (May 18, 2016). In its first such action, New York’s top financial watchdog reached a $3 million settlement Wednesday with two debt-buying companies that improperly bought and collected on illegal payday loans.

Vermont AG Enters Largest Settlement With Online Payday Loan Processor  (May 24, 2016)  In the settlement agreement, the company admitted that it processed electronic financial transactions on behalf of approximately 43 separate lenders, in connection with high-interest, small-dollar consumer loans made over the internet. None of those lenders were licensed to make loans in Vermont. Between 2012-2014, however, the company processed approximately $1.7 million in transfers from Vermont residents’ bank accounts.

Payday lender will pay $10 million to settle consumer bureau’s claims  (July 10, 2014) “Ace used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” bureau Director Richard Cordray said. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”

California Payday Lending Statistics

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

payday lender vultures

Payday and Car Title Lending Statistics

Payday Lending is a $135 million net drain on California’s economy each year: Despite industry claims about creating jobs, a 2013 report from the Insight Center for Community Development estimates the payday lending industry subtracts 1,975 jobs from California’s economy each year, and is a net loss to the state economy of over $135 million annually.

Nationally, four out of five payday loans are rolled over or renewed: Countering industry claims about payday loans as being useful for “one-time emergencies,” a study by the CFPB found that 4 out of 5 payday loans are rolled over or renewed within two weeks, adding to concerns about the high-cost “debt traps” created by these loans.

California consumers pay over $507 million in payday loan fees annually and $239 million in car title fees: A new report from the Center for Responsible Lending finds that consumers pay $239,339,250 in fees for car title loans and $507,873,939 in payday loan fees, ranking California as the #2 state for highest amount of fees paid for car title and payday loans.

More than 15,591 Californians had cars repossessed in 2014 because of car title loans: According to the California Department of Business Oversight, the charge-off rate for auto title loans in 2014 was 4.5 percent. (17,633 of 394,510).  At the national level, recent research from the CFPB found that 1 in 5 car title borrowers will have their car repossessed.

Do these facts concern you?  There is a KEY opportunity to weigh in with the Consumer Financial Protection Bureau as it finalizes rules to regulate payday, car title, and installment lenders. Please share your stories and comments here: CFPB comment.

Learn more about payday lending by visiting CRC’s website.

Would Postal Banking Be Better than Payday Loans?

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Earlier this week, Liana Molina, director of community engagement at the California Reinvestment Coalition, testified at a field hearing held by the Grand Alliance to Save Our Public Postal Service.  The alliance is focused on  “the choice now facing the U.S. Postal Service: Build on the heritage of universal, nationwide service and expand to meet the needs of the hi-tech economy and low-income communities – or continue to shrink with declining service, facility closings and job cuts.”

USPS picture

Molina’s testimony focused on a proposal for the USPS to complete with fringe, predatory payday, car title, and other high cost lenders by instead offering safe, low-cost financial services.  Her testimony is included below.

Good evening, my name is Liana Molina. I’m the Director of Community Engagement at the California Reinvestment Coalition (CRC). The California Reinvestment Coalition is a statewide, membership based organization working to build a fair and inclusive economy that meets the needs of communities of color, low-income communities, and others who have been marginalized and historically underserved.  We use strategic advocacy that leads banks and other corporations to provide investments and financial services that expand access to housing that is affordable, entrepreneurial opportunities, good jobs, and other tools to create and sustain household and community wealth.

Historically CRC has advocated for greater transparency and accountability of the banking industry, and we’ve pushed banks to grow and strengthen their community reinvestment lending, services and investments in low-income communities across California. Today we continue our work to expand access to fair and affordable banking, credit and other financial services and opportunities for underserved consumers.

I lead CRC’s Stop the Debt Trap campaign to reform high-cost payday, car title and installment lending practices. We are employing a multi-pronged approach that entails legislative and regulatory advocacy at the local, state and federal level. Before I delve into the specific policy reforms we are seeking and how the US Postal Service can play an important and impactful role in the struggle against predatory lending, let me share why we got involved in the fight to end predatory payday lending.

Our efforts against predatory payday lending stem from our work to change and improve the mainstream banking sector.

Did you know that every single payday loan borrower is also a bank customer? A consumer needs to have an active checking account in order to obtain a payday loan, since the loan is secured with a post-dated check which is then deposited by the lender on the consumer’s next pay date.

So these consumers are not entirely unbanked. These are people who likely use their bank accounts for direct deposit of their income and to handle other basic financial transactions, such as paying regular bills. Yet, these consumers cannot borrow a $300 or $500 loan from their bank because the banks do not make small dollar loans that meet the credit needs of their clients. So this is one way the banks are part of the problem.

Additionally, many of the big banks are actually invested in payday loan corporations through extending lines of credit they provide to payday lenders, which enable payday lenders to conduct their business. So while the banks aren’t making affordable small dollar loans directly to their customers, they have major credit agreements with payday lenders who then charge these same customers triple-digit interest rates on short-term loans. Banks involved in financing high-cost, low-quality lending through lines of credit and term loans to payday loan corporations include Wells Fargo, Bank of America, JP Morgan Chase, US Bank and others.

Finally, CRC has prioritized our Stop the Debt Trap campaign to end predatory consumer lending because when we talk about the provision of financial services in low-income communities, many economically disadvantaged neighborhoods do not have access to full service bank branches. Instead, these neighborhoods are saturated with fringe financial entities such as check cashers, pawn shops and payday loan outlets, all of which strip the income and assets of consumers struggling to make ends meet. We also know that payday loan stores are more likely to be located in African-American and Latino neighborhoods than in white neighborhoods.

Given this landscape, there is room for a lot of improvement in how our financial system meets the credit and capital needs of low and moderate-income consumers. While CRC agrees that there is a legitimate need for access to credit, debt trap products like payday, car title and installment loans (which are basically payday loans on steroids) do not help people over the long-term.

Payday Lenders

In California, the interest rate on a two-week, $300 payday loan is 459% APR. It amounts to $15 per $100, or $45 to borrow $255. It may not seem so bad at the face value, and most consumers can afford to pay $45 for a $255 loan. However, payday loans require a balloon payment of the full $300 at the borrower’s next pay date, two-weeks later. Most borrowers do not have $300 to pay off the debt without having to re-borrow. So unless the borrower has an increase in their income or a decrease in their expenses, in 4 out of 5 cases, they will take out another loan in order to meet their basic expenses for the next two weeks. This cycle repeats itself an average of 7-10 times for consumers, and drains Californians of over $578 million in interest and fees, annually.

High-cost car title and installment lending is growing in California. Now that the federal Consumer Financial Protection Bureau is poised to issue rules on payday lending, more payday lenders are moving into these other loan products that are just as dangerous. Our state doesn’t regulate the interest rates on payday loans below $300 or on consumer loans above $2,500. We are seeing more car title loans at interest rates at around 100% APR and longer-term installment loans with interest rates at 200% or higher. For example, one borrower working with us on the campaign paid $6,700 over 24 months for a $2,529 car title loan at 112.47%. It’s outrageous.

CRC and other consumer groups have been advocating for changes to local and state laws to rein in these predatory lending practices for many years, and it has been an uphill battle. One of our greatest challenges is the lack of wide-scale alternatives available on the market. Many of our policy makers accept predatory lending as a necessary evil, because they claim that their constituents need access to these loans, and the banks are not lending.

Do you see where I’m going with this?

This is where the concept of postal banking could really make a tangible difference in providing an accessible, responsible, affordable alternative loan product to consumers. The US Postal Service already provides some financial services, such as money orders, cashing of treasury checks, international paper and electronic money orders and gift cards. There is tremendous potential to expand the products and services offered by the USPS to meet the financial needs of underserved populations. We recognize that moving the postal service into offering consumer loans is a long-term process, not an immediate step. However, given the huge demand for small dollar consumer loans, it is a vision that is worth working toward.

When CRC learned about the Campaign for Postal Banking, we were excited to learn that a national coalition has come together to advocate for the USPS to act immediately to expand and enhance existing products and services. While the creation of small dollar lending and savings programs would necessitate Congressional legislation, the USPS could begin to build on the financial products and services currently offered. For example, the postal service could start cashing payroll checks, it could install surcharge-free ATMs in post office lobbies to enable recipients of public benefits to access their funds without paying fees, and it could introduce bill payment and electronic fund transfer services.

By providing less expensive financial products and services, the USPS could help improve the financial stability of millions of Californians. A postal banking system would not only benefit consumers who do not have access to mainstream financial institutions, it would also provide a sorely needed alternative to the big banks who wrecked our economy with predatory mortgage lending and then exploited tax payers by receiving trillion dollar bailouts.

We know that a public banking option is possible. The United States had a Postal Savings System from 1911-1967, which at its peak held about 10 percent of assets in the entire commercial banking system. Today, 1.5 billion people worldwide receive some financial services through their postal service in countries like the United Kingdom, France, Italy, and Japan. Posts around the world have demonstrated the feasibility of successfully providing financial services, increasing financial inclusion and generating revenue for the postal service.

We believe this is possible in the United States, and it will require our persistent advocacy and campaigning to bring about these types of changes. CRC is optimistic about the current dialogue around postal banking, and we look forward to participating in local, regional and statewide efforts to move this conversation forward. We greatly appreciate the work of A Grand Alliance to Save Our Public Postal Service and the Campaign for Postal Banking.

Thank you for the opportunity to testify.

 

Advance America Payday Lender Settlements

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

As the payday, car title, and installment loan industry is trying to fight the upcoming CFPB regulations, one of the claims they try to make is that store-front locations offering loans are far more legitimate and far less likely to take advantage of customers as compared to online lenders. We’ll agree that online lenders are also shady (read our post here:  8 Reasons Not to Get an Online Payday Loan)

Let’s examine this claim that storefront lenders are less shady.  First, it’s impossible to ignore the predatory rates they charge their customers, and the fact that 4 out of 5 of their customers are forced to renew their loans because the loan repayment terms are unrealistic.  These loans are allowed to be offered this way in many states because the industry has been so prolific at bribing…er…investing…er….making campaign contributions to state legislators who write the rules.  And, the industry has a well-documented history of using questionable smear tactics to defeat state legislation that would better protect consumers.

Put aside their bad products that are legal but predatory, and let’s move onto the claim that all storefront payday lenders follow the rules.  It turns out, that’s not the case either.  In fact, some car title, and instalmment lenders also don’t follow state laws, and as a result, are forced to settle with regulators and with attorneys who sue them.

In our first edition of “Payday Lender Law Breakers,” we’ll take a look at Advance America and its checkered history of settlements.

Shark payday 2

 There’s been a lot of them, so if we missed one, let us know in the comments section!

2015: State of Pennsylvania $22 million settlement: According to Lancaster Online, under this settlement, Advance America will pay $8 million in restitution, forgive unpaid balances of about $12 million, and pay another $2 million to the state for legal costs in administering the settlement.  Read more here: Payday lender Advance America to return $8M to Pa. consumers in settlement

2010: Missouri: Advance America agrees to settlement worth at least $5.8 million in cash and debt forgiveness to a class of Missouri residents.  Read more here: Payday Lender To Shell Out $6M In Class Settlement

2010: North Carolina: Advance American agrees to $18 million settlement in North Carolina: Read more here: Payday Loan Lawsuit Brings $18 Million Settlement Against Advance America

2010: South Carolina: Advance America part of $2.5 million lawsuit in South Carolina against payday lenders. Read more here: Payday Loan Class Action Settlement

2009 California: State of California Dept. of Business Oversight Settlement: In 2008 the Department conducted regulatory examinations of various Advance
America locations.  The examinations cited purported violations of the CDDTL, including that Advance America allegedly collected excess amounts from customers that made partial payments on their loans, allegedly collected NSF fees on returned checks that were deposited after customers made partial payments on their loans, allegedly failed to refund finance charges to customers that paid off their loans the next business day following origination, and allegedly conducted deferred deposit transactions at an unlicensed location (hereinafter collectively “Exam Findings”). Advance America disputes and denies the Exam Findings.  Read more here: State of California Settlement Agreement and Desist and Refrain Order

2009: Georgia Settlement: Press release: Advance America Announces Settlement in Georgia and the Closing of 24 Centers in New Hampshire

2009 Arkansas Settlement: Read more here:  http://www.stoppaydaypredators…

 

CRC resources on predatory payday, car title, and installment lending

Share Your Story about payday, high cost installment, or car title lending- It only takes 3-5 minutes. By sharing your experience, you can help take a stand against predatory lending and help the CFPB understand why consumers need strong rules to limit predatory loans.

Editorials Against Payday Lending Newspapers around the country are weighing in!  Check out this extensive compilation of 109 editorials (and counting!) against the debt traps created by payday and other high cost loans:

Payday Lender Hall of Shame: If you thought payday lenders are here to help, read this shocking expose of their worst practices.  Some truly shocking behavior!

North American Title Loans Repossess Car from Injured Consumer.  Watch this PBS NewsHour segment about TJ McLaughlin, whose car was repossessed after he couldn’t make payments because of a health problem.

Advocates bite back at payday lenders for “Shark Week” action

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Payday Loan Shark Attack!

Payday Loan Shark Attack!

Consumers, youth leaders and advocates staged a demonstration at a Check ‘N Go storefront in downtown San Francisco today to raise awareness about a unique breed of sharks – financial predators offering payday loans – as part of the Discovery Channel’s “Shark Week.”

Check out the coverage on Univision: Evite préstamos imposibles de pagar, ¿cómo evitar los préstamos del día de pago?

And on CBS San Francisco: Rally In San Francisco Calls Attention To Predatory Payday Lenders

During Conference

The CFPB will begin writing payday loan rules in early 2015, and advocates are urging the federal Consumer Financial Protection Bureau (CFPB) to implement strong consumer protection rules to end the payday loan debt trap. Research indicates most payday loan consumers end up in long-term debt after taking out their first payday loan, typically using 10 payday loans a year. Consumers who have struggled with payday loan debt or who have been harassed by payday loan collectors are encouraged to file complaints and share their stories with the CFPB via their website: www.consumerfinance.gov.

Group Picture Final

Community groups have been campaigning for local and statewide reforms for over a decade, resulting in numerous California cities adopting restrictive land use measures to restrict the growth of payday loan stores. Despite local leaders taking action, the California state legislature has failed to enact any consumer protections.

CRC payday organizer Liana Molina

Liana Molina from CRC

“Our state Senate and Assembly have repeatedly rejected payday loan reform proposals that would rein in payday loan abuses,” explains Liana Molina, an organizer with the California Reinvestment Coalition. “People think these loans will help them stretch their paychecks.  Instead, they find themselves in an endless cycle of renewing their original loans and paying hundreds of dollars in fees as a result.”

Michael Hampton

Michael Hampton, leader of Community Housing Partnership’s Community Organizing Resident Engagement program

“We’re calling on the payday loan industry to end their attacks against working people, and for the CFPB to do what our state has failed to do: end the debt trap,” says Michael Hampton, a leader of Community Housing Partnership’s Community Organizing Resident Engagement program.

Graciela Aponte

Graciela Aponte with the Center for Responsible Lending, California

Graciela Aponte of the Center for Responsible Lending and Fernando Aguilar of the Youth Leadership Institute also spoke to the crowd about the issue and what communities can do to fight back against the payday loan industry.

Fernando

Fernando Aguilar of the Youth Leadership Institute

CRC was proud to work with Community Housing Partnership’s Community Organizing Resident Engagement (CORE) tenant leaders, Youth Leadership Institute (YLI) and Mission SF Community Financial Center youth leaders, the Tenderloin Housing Clinic, the Housing Rights Committee of SF and the Center for Responsible Lending California to organize this action. Similar events are taking place across the country this week, coordinated by National People’s Action.

Payday loan shark attack

William “Bill” Gandy

Are you angry about payday loans and the financial damage they cause?  Sign our petition to the Consumer Financial Protection Bureau: Tell the CFPB: Payday Loans Must Include Consumer Protections

Also, check out John Oliver and Sarah Silverman’s take on payday loans: John Oliver Last Night.  (Some adult language)

Pressed for time?  Check out Consumerist, where they pulled out the five best lines from this episode: The Best Lines From John Oliver’s Takedown Of The Payday Loan Industry

The Payday Lender Hall of Shame

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Cartoon - Shark Infested Waters

Ever wonder why people are concerned about payday loans and some of the companies that make them?  Is it the high interest rates? The debt traps they create for their customers?  Their shady collection tactics?  The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above?

We’ve compiled excerpts from a few of the articles that highlight some of the worst practices of payday lenders below.  You may also enjoy our compilation of newspaper editorials against payday lenders (click here).

If you are a customer with a complaint about your payday lender, we suggest filling out a complaint with the Consumer Financial Protection Bureau (click here).  The online process is fast, and it’s important for the CFPB to hear when companies are breaking the law, especially since they’re writing rules for payday lenders this year.

A graphic from the Ace Cash Express training manual confirmed advocate suggestions that the payday loan industry profits the most off of people who continualy renew their loans because they can’t afford to pay them off.  The end result?  The consumer pays hundreds or even thousands of dollars for a loan that was originally only a couple of hundred dollars.

ACE Cash Express

 

 

“Over the next five years, those five short-term loans of $500 each would cost him more than $50,000 in interest.” KC man pays $50,000 interest on $2,500 in payday loans (Donald Bradley, Kansas City Star, May 17, 2016)

For her part, Mitchell said she’s done with payday loans, noting that she tells her 12-year-old daughter to stay clear of the products. “I would starve before getting another payday loan,” she said. “I just think it’s robbery.” 1,000% loans? Millions of borrowers face crushing costs (Alain Sherter, MoneyWatch, April 25, 2016)

Judge: $1,820 repayment on $200 loan ‘unconscionable’

Monday’s ruling by Vice Chancellor J. Travis Laster involved a loan that Gloria James of Wilmington took out in 2013 to pay for food and rent. James, who was earning $11.83 an hour as a part-time housekeeper at the Hotel DuPont, went to a storefront business called Loan Till Payday. It is run by National Financial LLC, a Utah company that specializes in small-dollar, high-interest loans. She obtained what the business called a Flex Pay Loan, requiring her to make 26, biweekly, interest-only payments of $60, followed by a final payment comprising both interest of $60 and the original principal of $200. The total repayments added up to $1,820, equating to an annual percentage rate of more than 838 percent. “That level of pricing shocks the conscience,” wrote Laster, who said the loan could be rescinded because it was “unconscionable.” He also concluded that National had violated the federal Truth in Lending Act. (Randall Chase, AP, March 14, 2016).

Report of Examination gives look inside payday lender’s alleged wrongdoing                    Banking examiners say the over-charges are actually “double-charges” the lender collects by requiring a post-dated check from the borrower for the loan amount and fees when a loan is made. The lender gets the double-charge by processing the check through the Automated Clearing House, a nationwide electronic network for credit and debit transactions, while also collecting an in-store cash payment from the customer, according to examiners. All American had an “unwritten” policy of not refunding customers for overpayments, unless and until the customer specifically requested a refund, examiners say. (Ted Carter, Mississippi Business Journal Feb 18, 2016).

As regulators put a price tag — $1.32 billion — on what Scott Tucker’s payday-lending enterprises have squeezed out of poor people, a grand jury convenes  On January 20, the FTC asked a federal judge in Nevada to find Tucker and his companies liable for $1.32 billion. That sum, the FTC says, equals what Tucker’s customers have overpaid above the disclosed costs of their loans since 2008 alone. The FTC’s request to the judge was accompanied by thousands of pages of evidence, unsealed for the first time, that show how Tucker made his money, what he spent it on, and how he has attempted to shield himself from the glare of authorities. (Steve Vockrodt, The Pitch News, Feb. 2, 2016)

EZCorp settles federal payday lending complaint: The $10.5 million charge will be included in the company’s financial statements for the year ended Sept. 30. EZCorp also agreed to forgive all outstanding payday and installment debt, which had already been written off for financial purposes, the release indicates. (Christopher Calnan, Austin Business Journal, Dec 16, 2015).

Justices crack down on high-interest usury The court rejected defendants’ expert witnesses’ view that an 11,000 percent – or even an 11 million percent – interest rate would be acceptable in New Mexico because there is no usury statute.  (Marshall Martin, guest column for Albuquerque Journal, September 1, 2014)

High-Interest payday loans called predatory, but regulations die In Iowa Legislature Contributions from the payday loan industry amounting to over $83 million have poured into state campaigns across the country, according to data from the National Institute on Money in State Politics. The institute shows Iowa legislators have pocketed more than $360,000 from donors associated with the payday loan industry since 1998. (Lauren Mills, Iowa Watch, August 10, 2014).

Payday loan firms drove Samantha’s dad to suicide. But even death didn’t stop them hounding him He killed himself last November, too embarrassed by his debts to seek help. Giving evidence, Samantha told the inquest that after his death her father was sent more than 1,000 texts from loan companies demanding repayment.She has no idea how many texts Ian received before he killed himself, because he’d deleted his phone’s history, but she can’t believe they only started afterwards. She also found letters from payday lenders at his home demanding immediate repayment of outstanding arrears. One, delivered two days after his death, threatened court action and bailiffs unless he paid up.

ACE Cash Express paying $10 million to settle debt collection probe When a consumer “exhausts the cash and does not have the ability to pay,” ACE “contacts the customer for payment or offers the option to refinance or extend the loan.” Then, when the consumer “does not make a payment and the account enters collections,” the cycle starts all over again — with the formerly overdue borrower applying for another payday loan, the bureau said.   (Barry Shlachter, Star Telegram, July 10, 2014)

Will the Government Finally Regulate the Most Predatory Industry in America?  “Jones was almost lucky compared to Thelma Fleming, another Baton Rouge resident who pawned her jewelry, had her checking account shut down and lost her car trying to keep up with a string of loans she took in order to make ends meet after she lost one of her two jobs. “For me, it was devastating,” she said. “It got the best of me to the point where I considered suicide.””  (Zoë Carpenter, The Nation. June 27, 2014).

Payday loans may help, but at what price? “Almost half the borrowers are the people who are have fixed incomes, so they’re never going to have any more than they had this month,” Cook said. “Once they start down the payday loan route, they’re really trapped.” (Eric Schwartzberg, Journal-News. June 23, 2014)

Judgment Day for Payday Lenders  In a 2012 report, the watchdog organization Public Campaign found that the payday lending industry had spent more than $1 million during the previous decade to influence Missouri’s elections. In 2011, the legislature had voted to “cap” the APR for payday loans at 1,656 percent. “Members who voted for this pro-industry bill,” according to the report, “received nearly three times more payday money on average … than members who voted in opposition.” (Theo Anderson, In These Times, June 16, 2014)

McDaniel Files Suit Against Online Payday Lenders McDaniel’s suit says that the defendants issued short-term loans to Arkansas consumers with varying interest rates, but all loans had interest rates that were extraordinarily higher than the 17 percent limit set by state law. One loan had an annual rate of 782.14 percent. Others were 640 percent and higher. ( McDaniel Press Release, June 9, 2014)

Fast loans often come with high price tags  The company Hill used, Progressive Debt Relief, charged him a $25 fee for every $100 he borrowed. When Hill fell behind on monthly payments, the company, which required Hill to submit his bank account number before he could get any money, was able to draw the entire amount of the loan from Hill’s account. “They cleaned me out,” he said. (Susan Sharp, FME News Service, June 8, 2014)

Race-car driver’s payday lending business ‘deceived borrowers’ In a typical case, the company would tell someone borrowing $500 that they would only have to repay $650. But in reality, the company would rely on confusing language deep in the fine print to automatically renew loans borrowers thought they were paying off, the judge ruled. So a $500 loan could actually cost the borrower $1,925.  Navarro noted that the company’s own training material encouraged employees not to explain the true cost of the loan to borrowers.  (David Heath, Center for Public Integrity, June 6, 2014)

payday lobbyist

Payday Lenders Pay Premiums Of course, those weren’t the only ways Cash America and other payday lenders tried to elude the reach of federal investigators. As CREW chronicled in earlier reports, including Payday Lenders Pay More, released in 2011, the payday lending industry ramped up lobbying and campaign contributions over the past several election cycles while unsuccessfully attempting to ward off federal oversight and derail the Dodd-Frank Wall Street Reform and Consumer Protection Act. CREW’s latest analysis shows the industry is still spreading money around in hopes of limiting federal regulation of payday lending.  (David Crockett, Citizens for Responsibility and Ethics in Washington January 14, 2014)

Payday loan managers with Las Vegas ties to pay $100,000 in penalties The managers of an illegal payday loan business with operations in Las Vegas have been ordered to pay $100,000 in penalties and forfeit more than $1 million in outstanding loans, according to a final settlement announced by California regulators.  (Chris Sieroty, Las Vegas Review-Journal, December 25, 2013).

truth in lending crackdown on payday

Banks Must Stop Financing High-Cost Consumer Lenders Some of the retail storefront payday lenders financed by these banks lend those dollars back out to the community at rates of as high as 500%.This type of behavior is a net loss that outweighs many of the good things that banks do elsewhere in communities. (Adam Rust, BankThink Blog, December 16, 2013)

Cashing Out: The Usury Suspects, Part 2 “On average, repeat customers account for 40-50% of the Company’s annual loans,” the overview reads. “The Company’s average customer will borrow ~$1200 (~3 loans) and repay ~$2350 over a 4-year timeframe. Margins on loans to repeat customers average 150% higher than loans to new customers.”  To translate: The average person who takes out a loan from Kimball and Furseth ends up paying back double what he or she initially borrowed. Factor in the 500,000 loans that Evergreen Capital Partners says it has issued since its inception, and a picture emerges: Operators and investors can get pretty rich with a business model like this.  (David Hudnall, The Pitch, December 10, 2013)

How KC’s wealthiest enclaves became a shadowy nexus of predatory lending Over the next five years, Tucker, through CLK, is believed to have pioneered many of the shadowy hallmarks that now define the online payday-loan industry, such as constructing byzantine trails of front companies and merging with Indian tribes to provide his businesses with regulatory immunity. (Only the federal government can sue businesses on tribal lands. That makes it difficult for states to prosecute Tucker when his companies lend at interest rates surpassing the caps they have in place.)  (David Hudnall, The Pitch, December 3, 2013)

Payday lender Cash America fined over claims of robo-signing, gouging military members Problems at Cash America came to light when the bureau conducted its first exam of the company in 2012. Before the visit, examiners told the company to retain documents and call recordings for review. But bureau agents learned that employees were instructed to shred files and erase calls. Employees confessed that managers had also coached them on what to say to examiners, according to the compliant.  (Danielle Douglas, Washington Post, November 20, 2013).

payday vultures I Applied For An Online Payday Loan. Here’s What Happened Next “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis,” he told me. “That’s when the vultures come out.” (Pam Fessler, NPR News, November 6, 2013)

 The Payday Playbook:  How High Cost Lenders Fight to Stay Legal Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.  (Paul Kiel, Propublica, August 2, 2013, part of the Debt Inc. Lending and Collecting in America series)

Usury Cartoon RJ Matson St. Louis Post Dispatch Jan 12 2012

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