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

The 10 Most Popular Stories in Consumer Finance in 2014 on CRC’s blog

What were the most popular posts on the CRC blog in 2014?

1) Most popular: City of Los Angeles Lawsuit Against Chase, Wells Fargo, Citigroup, and Bank of America

The City of Los Angeles filed a lawsuit against JPMorgan Chase for targeting minorities for predatory mortgages and the subsequent economic damage when these loans went into default.  The City Attorney, Mike Feuer, has already sued Wells Fargo, Citigroup Inc, and Bank of America for the same issues.  See this Law 360 article on a new lawsuit filed in December 2014:  LA Sues JPMorgan, BofA, Citi Over Discriminatory Lending

2. New Resource for Widowed Homeowners Facing Foreclosure

The “widows and orphans” problem refers to the fact that many widows, orphans, and others who inherit or have an ownership interest in property have faced foreclosure upon the death of a loved one because they were not listed on the loan, and the servicer would not work with them so that they could keep the family home.  See the recent announcement from the CFPB that they will providing additional updates to these rules here: CFPB Proposes Expanded Foreclosure Protections

3. Editorials Against Payday Lenders

How do over 50 newspapers feel about the payday lending industry?  Take a look and learn why advocates are excited about the Consumer Financial Protection Bureau’s upcoming rule-making for an industry who had a number of scandals in 2014.

4. The Payday Lender Hall of Shame

This is the worst of the worst when it comes to payday loan stories- here’s just a small sample, be sure to read the full post, and while you’re at it, sign our petition to CFPB Director Richard Cordray.

  • 1,000 text messages sent to a man after his suicide from debt collectors?
  • $83 million in campaign contributions made by the payday loan industry to prevent strong consumer protections from being enacted into laws
  • Training manuals that tell payday loan staff how to keep customers caught in the debt cycle

5. Banc of California Acquisition of 20 Banco Popular Branches Opposed 

After CRC members and allies opposed this acquisition, Banc of California agreed to create a public, 5 year community benefit and reinvestment plan.

6. Community members gather in Oakland to Celebrate California Reinvestment!

While CRC members and allies are serious about economic justice, they also know how to have fun.

7. Community leaders protest sale of 20 local Banco Popular Branches in Los Angeles

CRC members and allies held a press conference in front of a Banco Popular branch in LA as part of our initial opposition to Banc of California purchasing 20 Banco Popular branches.

8. John Oliver and Sarah Silverman on Payday Loans  

This post is self-explanatory, but if you watch the video, know that this industry is so bad there’s some adult language used by Mr. Oliver and Ms. Silverman.

Our favorite line? 

After a payday lender says “If you can’t pay the loan, don’t worry, we’ll be there to work with you.”

Oliver responds “No S*** you’ll be there, your business model depends on it!

(He’s referring of course to the debt trap that is sprung for the majority of people who take out a payday loan and find themselves unable to repay it two weeks later).

9. Bank Payday Loans No Longer Offered By Wells Fargo or US Bank

CRC was particularly happy to see this announcement after our opposition to banks providing these “direct deposit advance” loans that were very similar to payday loans.  Of course, we’d still like to see the banks get completely out of the business of payday lending, and stop providing financing to these modern day loan sharks.  For more on the financing that main street banks provide to payday lenders, see the report “Connecting the Dots” from our ally, Reinvestment Partners, based in North Carolina.

10. 80 Organizations Call on Federal Government to Address Private Equity and Investor Landlords

Have you heard about Wall Street’s latest profit scheme?  After millions of homeowners lost their homes to foreclosure, private equity is now moving into the housing market, buying roughly $200 billion worth of single-family homes, with the intent of securitizing the rental income…sounds familiar, doesn’t it?  Just look out if you’re a first-time homebuyer (hard to compete with all cash offers), a tenant (you might get booted to make way for higher paying renters), or a community, whose makeup could be changed thanks to the new landlords.

And, our three honorable mentions (we should point out that the OneWest post is only a few weeks old, so it was at a distinct disadvantage!)

A.  Community Leaders Hold Press Conference at OneWest Bank Headquarters 

In December, CRC received a response to our FOIA request to the FDIC, asking how much money the FDIC has paid out and expects to pay out in the future, under controversial shared loss agreements with the bank.  We released the figures (OneWest is on track to receive a whopping $2.4 billion by 2019!) at a press conference with our members and allies in front of the bank’s headquarters, where we called on the Federal Reserve to hold public hearings about this proposed, Too Big To Fail bank merger.  CRC also called on the bank to implement a foreclosure moratorium for surviving spouses whose mortgage is serviced by a OneWest subsidiary, Freedom Financial.  Read Kevin Stein’s HousingWire post to learn about three elderly homeowners who were facing foreclosure by OneWest Bank, and why we’re urging the bank to implement a moratorium until HUD develops rules to address situations where surviving family members are facing foreclosure due to a reverse mortgage.

B. Why we need Operation Choke Point to stop Illegal Online Payday Lenders

Payday lenders need access to your checking account in order to process the loans.  Learn more about Four Oaks Bank, and how 14 consumers were harmed by the bank playing an enabling role in processing illegal predatory loans.

C. Tenants Rights After a Foreclosure Upheld by California Court of Appeal

The story of a bank becoming the owner of a home after a foreclosure trustee sale is common in California.  Unfortunately, so is the experience of these two tenants who had continued paying their rent and should not have been evicted.  After a trustee sale, some real estate agents will try and get the current tenants out of the property as quickly as possible, offering cash for keys, making illegal threats, or even calling the police.  Tenants may or may not know their rights, and the real estate agents may take advantage of this and try and force them out quickly.

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

Why we need Operation Choke Point to stop Illegal Online Payday Lenders

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.

Operation Choke Point is the name given to the Department of Justice’s increased focus on banks and other enablers of illegal online payday loans and other scams.

Wondering why this focus is necessary?  Take a look at a recent DOJ settlement with Four Oaks Bank.

According to the complaint against Four Oaks Bank, its business relationship with a payment processor essentially allowed illegal online lenders access to customer’s bank accounts to make illegal loans, charges, and withdrawals:

As of today, approximately 97 percent of TPPP-TX’s merchants for which Four Oaks Bank permits debits to consumers’ accounts are Internet payday lenders. A payday loan typically is a short-term, high interest loan that is not secured (made without collateral) and that has a repayment date coinciding with or close to the borrower’s next payday. Most payday loans are for $250 to $700. Annualized interest rates for Internet payday loans frequently range from 400 percent to 1,800 percent or more – far in excess of most states’ usury laws.

Wonder how these loans affect the consumer? Read more from the complaint:

The design, intent, and effect of these fraudulent Internet payday lenders’ conduct
creates a false pretext to withdraw money from borrowers’ bank accounts in amounts far exceeding the reasonable understanding and expectations of borrowers. Through this process of misleading and deceptive Internet payday lending, many of the borrowers are sucked into a vortex of debt and their bank accounts are debited until they are bled dry. Moreover, as a consequence of unanticipated loan extensions, rollovers, and unanticipated interest payments debited from their bank accounts, many of the borrowers incur further harm in the form of substantial overdraft or “insufficient funds” fees from their own banks.

If you want to see the personal impacts, read these stories from the complaint:

During the 20-month period from January 2011 until August 2012, Four Oaks Bank
received at least hundreds of Requests for Proof of Authorization from borrowers’ banks in connection with debits originated by TPPP-TX on behalf of some of its Internet payday lenders. In nearly all cases, the only evidence that a debit had been authorized is an Internet payday loan contract with the kind of facially misleading and deceptive loan repayment language described above.

The borrowers who have stated under penalty of perjury that their bank accounts have been debited without authority include:

a. A.H. is a resident of Arizona, which prohibits loans with an annualized
interest rate above 36 percent. Over the Internet, A.H. received a $400
loan from Payday Lender 2, purportedly of Montana, at an annualized
interest rate of 664.38 percent.

b. L.N. is a resident of Colorado, which effectively prohibits payday lending.
Over the Internet, L.N. received a $355 loan from Payday Lender 3,
purportedly of Montana, at an annualized interest rate of 664.38 percent.

c. C.D. is a resident of Georgia, which prohibits payday lending. Over the
Internet, C.D. received a $305 loan from Payday Lender 4, at an annualized
interest rate of 762.14 percent.

d. D.H. is a resident of Maryland, which prohibits loans with an annualized
interest rate above 33 percent. Over the Internet, D.H. received a $1,000 loan
from Payday Lender 1, purportedly located in Belize, Central America,
at an annualized interest rate of 995.45 percent.

e. I.C. is a resident of Massachusetts, which prohibits loans with annualized
interest rates above 23 percent. Over the Internet, I.C. received a $305
loan from Payday Lender 5, at an annualized interest rate of 644.12 percent.

f. A.H. is a resident of Missouri, which prohibits loans in which the interest
and fees exceed 75 percent of the loan amount, and loans of less than 14
days in duration. Over the Internet, A.H. received a $500 loan from
Payday Lender 6 (operating under a fictitious name), purportedly of San
Jose, Costa Rica, at an annualized interest rate of 1,825 percent for a term of
seven days.

g. D.A. is a resident of New Jersey, which prohibits loans with an annualized
interest rate above 30 percent. Over the Internet, D.A. received a $200
loan from Payday Lender 7, at an annualized interest rate of 612.13 percent.

h. A.W. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, A.W. received a $305
loan from Payday Lender 4, at an annualized interest rate of 1,095 percent.

i. D.M. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.M. received a $500
loan from Payday Lender 8, at an annualized interest rate of 1,161.36
percent.

j. D.H. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.H. received a $200
loan from Payday Lender 7, purportedly of Utah, at an annualized interest
rate of 1,804.72 percent.

k. D.G. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.G. received a $500
loan from Payday Lender 6, at an annualized interest rate of 1,825 percent.

l. D.R. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.R. received a $200
loan from Payday Lender 7, at an annualized interest of 1,804.72 percent.

m. A.F. is a resident of North Carolina, which prohibits loans with an
annualized interest rate above 36 percent. Over the Internet, A.F. received
a $600 loan from Payday Lender 1, purportedly of Belize, Central America,
at an annualized interest rate of 608.33 percent.

The California Reinvestment Coalition recently signed onto a letter with 26 other state and national consumer protection organizations, calling on the US Senate to support the efforts of Operation Choke Point, you can read the letter here.

UPDATE: If you’re angry about the damage caused by payday loans, consider signing our new petition to the Consumer Financial Protection Bureau, calling on Richard Cordray to implement strong consumer safeguards in the new rules they’re designing for payday loans.  You can sign it here: CFPB Petition

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.