Payday Lending in Louisiana

Together Baton Rouge

A presentation on Payday Lending in Louisiana. Provided at the Together Louisiana Statewide problems Conference on February 15th, 2014.

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  1. 1. Payday Lending in Louisiana Statewide Issues Conference February fifteenth, 2014
  2. 2. whom? HOW? WHAT?
  3. 3. Whom Runs On The Pay Day Loan?
  4. 4. Families with kids making $15,000 — $40,000 per year Disproportionately AfricanAmerican or Latino bad Credit History want extra cash for emergencies and fundamental living expenses Social Security Recipients
  5. 5. just How lots of people simply take down payday loan in Louisiana?
  6. 6. Payday really loves Louisiana 23% of Louisiana households depend on predatory financing 6th greatest into the country US typical: 18% About 57,000 Louisiana households sign up for payday advances per year supply: Louisiana Budget venture
  7. 7. Payday Enterprize Model
  8. 8. Payday company Model Billions & billions served # of McDonalds # of Payday stores 12,800 20,600 230 936
  9. 9. Payday enterprize model = repeat that is multiple plus the financial obligation trap. Many loans that are payday to “immediate perform borrowers” New loans made within a bi weekly duration 76% Loans to one-time users 2% Initial loans to repeat users 11% New loans after 14-30 day pause 6% brand New loans after 30 time pause 5%
  10. 10. Payday enterprize model = repeat that is multiple as well as the financial obligation trap. Many revenue that is payday from “more loans per customer”
  11. 11. Payday enterprize model = numerous perform loans while the financial obligation trap. When you look at the their very own terms … “In any large, mature pay day loan profile, loans to duplicate borrowers generally constitute between 70 and 90 per cent associated with profile, as well as some loan providers, much more.” – Community Financial Services of America (leading industry trade association that is payday
  12. 12. Payday enterprize model = numerous perform loans as well as the financial obligation trap. Into the unique terms … “The concept in the industry is you need to get that customer in, work to make him as a repetitive consumer, long-lasting client, because that’s where in fact the profitability is.” – Dan Freeman, CEO of money America
  13. 13. Debt Period
  14. 14. Interest Rates apr (APR) Average 30-year mortgage scholar Loan car loan Sub-prime home loan Credit Cards PAY DAY LOANS as much as 5% 8% 2% 8% 12% 23% 8% 15% 15% 36% 150% 782% supply: Louisiana Budget venture
  15. 15. How can this work? ? ? ? ? ?
  16. 16. Just just How pay day loans carry triple digit APR’s Payday Loan Amount $100 + Interest ____+ 16.75%________ Amount owed = $116.75 ____16.75 per cent X 26 Two-week periods Two-week durations 1 = 436% APR Plus fees of $10 PER LOAN brings APR to 696% year!
  17. 17. Supply: Louisiana Budget Venture
  18. 18. Individuals who remove an online payday loan are as prone to seek bankruptcy relief as people REFUSED for cash advance of individuals in BR who seek bankruptcy relief do this, to some extent, as a result of pay day loans Payday borrowers are because prone to have filed for bankruptcy in last five years supply: Louisiana Budget venture
  19. 19. Payday hurts our economy cash consumed charges and interest is cash lost to Louisiana families and state economy Amount in payday costs and interest obtained from Louisiana families PER 12 MONTHS (2011 numbers) $196,394,987 supply: Insight Center for Economic developing, “The Net Economic Impact of Payday Lending within the U.S.”, 2013
  20. 20. Payday hurts our economy web jobs lost EVERY YEAR as a result of financial effect of payday financing 671 jobs lost (each year) supply: Insight Center for Economic developing, “The Net Economic Impact of Payday Lending into the U.S.”, 2013
  21. 21. Where are pay day loan shops in my own town?
  22. 22. Alexandria # of payday loan providers 29 Source: Louisiana Budget venture
  23. 23. Shreveport / Bossier City # of payday loan providers 78 supply: Louisiana Budget venture
  24. 24. New Orleans # of payday loan providers 45 supply: Louisiana Budget venture
  25. 25. Monroe # of payday loan providers 30
  26. 26. Lake Charles # of lenders that are payday
  27. 27. Lafayette # of payday loan providers 39 supply: Louisiana Budget venture
  28. 28. Baton Rouge # of payday loan providers 85 (State Capitol of Payday) supply: Louisiana Budget venture
  29. 29. Exactly just How did this take place? • Louisiana has “usury laws”, preventing loans with rates of interest greater than 12%. • Louisiana legislature passed a legislation in 1990s EXEMPTING payday loan providers from usury regulations (“Louisiana Deferred Presentment and Small Loan Act”) • Legislature passed a legislation in 2010 enabling ADDITIONAL FEES for pay day loans. (that do you would imagine they’re hearing from?)
  30. 30. What exactly are other states doing? GEORGIA Regulates payday lending through legislative action: limit at 16% APR interest. – The regulation reduced the amount of people whose bank reports had been involuntarily closed as a result of repeated overdrafts by 11-16 % ARIZONA this season, passed a limit of 36% APR, which especially pertains to payday advances.
  31. 31. What exactly are other states doing? ARKANSAS State Supreme Court ruled that Payday Lending violates state usury rules – final payday lending store left their state last year. VERMONT Regulated payday loan providers in 2006 through legislative action. – Families stored very nearly $100 million/year – Former borrowers reported an effect that is“positive to their personal finances
  32. 32. What exactly are other states doing? TEXAS Taking a city-by-city approach Dallas that is, San Antonio, and El Paso manage where payday lenders operate, just exactly how they issue loans and whatever they charge in interest and charges. WASHINGTON STATE – Capped the final number maxlend loans review of payday loans which can be lent to your person from any business at 8 each year. – amount of yearly cash advance transactions fell from 3.2 million to 856,000.
  33. 33. “Military Lending Act” (2007) Prohibits lenders that are payday billing APR’s above 36 % to active army workers and their dependents. – The Pentagon discovered that army personnel collectively paid over $80 million of these salaries toward charges every year. – Department of Defense: “Predatory lending undermines army readiness, harms the morale of troops and their loved ones, and increases the price of fielding an all volunteer fighting force.”
  34. 34. You can find options to Payday! Examples: Louisiana Federal Credit Union provides affordable, short-term loan item: – $300 loan, with maximum of 15% APR. ASI Credit Union provides “Stretch Loan” of between – $200 to $500 loan, with 12per cent APR. MORE MANY usage alternatives in states that control Payday Lending
  35. 35. HOME MEETINGS Share a whole tale regarding how debt has affected you or somebody you understand?
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