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

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.

Why Do Hundreds of Organizations Want Strong CFPB Rules For 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.

 

ACE Cash Express

Training Manual from ACE Cash Express on how to keep consumers stuck in the debt trap. Obtained as part of CFPB settlement with the company.

In October this year, 466 organizations signed onto a letter to the Consumer Financial Protection Bureau, urging the agency to design rules for payday loans that would end the so-called debt-trap.

What is the debt trap?  Well, imagine you’ve run short on money for the month, so you think you’ll use a payday loan to make ends meet (after all, that’s what their marketing tells you it’s for, right?).  Unfortunately, two weeks later, when you’re expected to repay the loan, your income situation may not have changed, meaning you don’t have enough to pay back the loan and have enough money left to pay your regular bills.  So, you pay back your loan, and take out a new one.

This cycle repeats itself over and over and over again.  In fact, new research from our colleague at the Center for Responsible Lending, finds that lenders generate 76% of their revenue from borrowers who take out 7 or more loans per year.

This research, once again, contradicts industry claims (and marketing) that the loans are for “one-time, emergency use.” In fact, the loans are designed to keep people in debt because that’s how the industry makes its profits.

You can read the more in-depth letter, (link here) written by Americans for Financial Reform to get a better understanding of the problems with payday loans and the ways that the CFPB can address the problems and protect consumers.

If you’d like to stay informed as the CFPB develops these rules, sign our petition to the CFPB, and we’ll keep in touch. Also, if you have a story you’re willing to share about payday loans, we’d also appreciate your input:  Petition to CFPB

The letter struck a nerve in California, where 35 organizations signed onto it, many of whom are CRC members and allies:

Asian Law Alliance
California Association of Food Banks
California League of United Latin American Citizens (LULAC)
California Partnership
California Reinvestment Coalition
CALPIRG
City Heights Community Development Corporation
Community Legal Services in East Palo Alto
Consumer Credit Counseling of San Francisco
Consumers for Auto Reliability and Safety
East Bay Community Law Center
East LA Community Corporation
Faith in Community
Habitat for Humanity Greater San Francisco
LA County Consumer Affairs
Labor Community Services
Law Foundation of Silicon Valley
Mission Assets Fund
Mission SF Community Financial Center
Mutual Housing California
New Economics for Women
Northbay Family Homes
Nuestra Casa de East Palo Alto
Opportunity Fund
Public Counsel
St. Joseph’s Family Center
T. Cooke and Associates
The Fair Housing Council of San Diego
Treasurer, City and County of San Francisco
United Policyholders
United Way Silicon Valley
West Valley Community Services
Working Partnerships USA
Yolo Mutual Housing Association
Youth Leadership Institute

Want to Honor Vets? Stop Gouging Them With Payday Loans

California Advocates Suggest California Members of Congress and California State Legislature Could Honor Veterans By Strengthening Protections Against Predatory Payday Loans

Veterans and Loan Sharks

The California Reinvestment Coalition and the Center for Responsible Lending issued a call today, urging state and federal lawmakers to consider strengthening protections for veterans and their families.  Earlier this year, the Department of Defense released proposed rules to update enforcement of the Military Lending Act, which was passed in 2007.  An update is necessary because of shady lenders exploiting loopholes in the 2007 law.  With more than 1.8 million veterans, California is home to the nation’s largest number of veterans. California also has the nation’s largest active duty military population—over 160,000 service members.

The vicious cycle of debt is not a side effect of payday lending it is the business model. A Center for Responsible Lending analysis shows that California payday lenders, who advertise their products as a one-time quick fix for consumers facing a cash crunch, generate 76% of their revenue from borrowers who take out 7 or more loans per year. A map of California payday lending locations shows the lenders cluster in low-income communities.

Also, have you heard about the upcoming CFPB rulemaking on payday loans?  We need all hands on deck to make sure the process results in strong rules that protect consumers—not payday lenders!  Sign our petition to the CFPB and we’ll also let you know when the public comment period opens and if there are upcoming advocacy opportunities:  Payday Loan Petition to Richard Cordray

And, if you’re interested in learning more about payday loans and the harms they cause, check out a few of our most popular posts from earlier this year:

1) EDITORIALS AGAINST PAYDAY LENDERS

2) SEVEN IMPORTANT UPDATES ON PAYDAY LENDING IN CALIFORNIA AND NATIONALLY

3) CAREFUL! ALTERNATIVES TO PAYDAY LOANS CAN ALSO BE PREDATORY

4) THE PAYDAY LENDER HALL OF SHAME

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.

Seven Important Updates on Payday Lending in California and Nationally

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.

This has been a busy summer for the payday loan industry!  We’re including seven important updates below.  While you’re here, consider signing our petition, calling on the CFPB to include STRONG consumer safeguards as it designs new rules for payday loans:  Petition to CFPB Director Richard Cordray

ACE Cash Express

How Ace Cash Express  staff were trained to encourage customers to continue renewing their payday loans. (From Ace Cash Express training manual)

1) On July 10, the CFPB announced a settlement with Ace Cash Express which has 1,600 locations nationwide and 200 in California. As part of the settlement for illegal debt collection tactics, the payday lender will pay $5 million to the CFPB, and will return $5 million to customers. One of the “smoking guns” from the settlement is a graphic from a 2011 training manual for the company. The picture spelled out how Ace Cash Express employees should encourage customers to renew their payday loans if they couldn’t afford to pay them back.(See graphic here). In other words, advocate concerns about the “payday loan debt trap” keeping people in a constant cycle of taking out new loans and paying high fees are well-founded.

Local momentum continues to build, with California cities moving policies to protect communities from the saturation of payday lenders.

2) In Fresno, the city council unanimously voted for a new ordinance that requires a new permit application and a “buffer zone” of at least a quarter mile between locations and limits areas where new stores can open.

3) Daly City adopted similar location restrictions.

4) In Victorville, the town council passed a 45 day moratorium on approving permits for money service businesses, including payday lenders, check cashers, and car title lenders.

5) Local leaders are also working on payday lending restrictions in San Mateo and Menlo Park.

6) At the federal level, House Republicans have recently attacked “Operation Choke Point” which is the DOJ’s initiative to prevent banks from enabling illegal online payday lending, among other things. Four Oaks Bank, the first settlement under Operation Choke Point, allegedly facilitated $2.4 billion in illegal transactions, and later settled with the DOJ.

7) The Protecting Consumers from Unreasonable Credit Rates Act was recently introduced in the House. The bill would extend existing protections for servicemembers, and caps interest rates at 36% for all consumers at 36% for products including payday and car title loans. The Senate version of this bill is co-sponsored by Senator Barbara Boxer.

Most promising is the Consumer Financial Protection Bureau’s upcoming rule-making process, which has the potential to instill significant industry reforms to end the payday loan debt trap for consumers. While the CFPB cannot impose an interest rate cap, CRC and our allies are calling for the Bureau to issue the strongest proposal feasible, including a limit on the payday loan cycle, a determination of the borrower’s ability to repay the loan and a prohibition of the lender’s direct access to consumers’ bank accounts.

This is a critical moment, now is the time to push for a strong rule as it is  developed over the next several months.

Please join CRC, advocates and consumers from across the country in sending a message to the CFPB urging them to craft a strong rule to end the debt trap. Sign our petition to Director Richard Cordray and make sure the new rules end abusive practices!

Sign petition here and please share with your networks: Payday Loan Petition to Richard Cordray

Thank you for your support!

Liana Molina

Payday Campaign Organizer

California Reinvestment Coalition

Bank Of America Agrees To Scan For Illegal Payday Lenders In NY

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.

Bank of America agrees to scan NY database to ensure they’re not helping illegal payday lenders. Via Consumerist.

Will Bank Payday Loans Become a Thing of the Past?

deposit advance loans as hamster wheels

The New York Times editorial board, which has written about payday lenders previously this year (Progress on Predatory Lending)  wrote earlier this week (Banks as Payday Lenders)  about payday loans that are offered by banks like Wells Fargo, US Bank, Regions Financial and Fifth Third Bank.  While the banks call them different names (like “deposit advance”), they share many of the same negative characteristics as loans offered by storefront and online payday lenders, including sky-high interest rates and short repayment terms.

Fortunately, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently released guidance to member banks that if they continue making these loans, they will face much higher scrutiny by their regulators.

Last year, the California Reinvestment Coalition, along with our national partners, Woodstock Institute, New Economy Project, and Reinvestment Partners, released a report  (The Case for Banning Payday Lending: Snapshots from Four Key States) focused on payday lending which  cited the dangers created for consumers in each of our states (California, Illinois, North Carolina, and New York) by these loans.

While we are excited to see this guidance, as American Banker noted, (Wells Fargo, U.S. Bank Face Crossroads on Deposit Advances) the Federal Reserve did not sign onto this guidance, which may mean that the two banks it regulates that offers these loans: Regions Financial and Fifth Third may continue making these destructive loans.

The momentum against payday loans- whether they’re provided through a storefront, a mainstream bank, or online, is growing.  As an example, the Consumer Financial Protection Bureau announced its first enforcement action against a payday lender in November:  The Plain Dealer: Cash America to pay $19 million – most in refunds – in CFPB’s first payday action.   This momentum will likely continue growing, with the CFPB likely announcing rulemaking next year on payday lenders.

The Consumer Financial Protection Bureau is now accepting complaints about payday lenders. Consumers are encouraged to visit: http://www.consumerfinance.gov/complaint/

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

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.