New Payday Loan Facts in California

Did you hear that the Consumer Financial Protection Bureau is finalizing rules for high-cost payday, car title, and installment loans?

If you’re curious to know more about these loans, and the impact they have (mostly negative) on Californians and our state economy, then you’ll want to read CRC’s new fact sheet on payday lending in California.

It includes the latest data from the California Department of Business Oversight, as well as research on the negative drag to California’s economy created by payday loans.

california-payday-loan-brochure

 

 

You can download the fact sheet by clicking here.

If you want to learn more about payday loans in California- and the work the California Reinvestment Coalition is doing to take on predatory lending, click here and visit the CRC website.

Los Angeles County Takes Stand Against Predatory Payday, Car Title, Installment Lending Practices, Urges Strong CFPB Rules

Editor’s note: If your organization would like to support strong consumer protections being included in the new CFPB rules for payday, car title, and high-cost installment loans, please contact Liana Molina (liana AT calreinvest.org) at CRC and she can help.  The deadline to give your feedback is approaching fast- it’s October 7, 2016!

On Thursday, September 8th, the Chair of the LA County Board of Supervisors, Hilda L. Solis, hosted a press conference with LA community leaders where she talked about the financial harms caused by predatory payday, car title, and high-cost installment loans.

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(Photo credits: Supervisor Solis' office, LULAC, Samuel Chu, and CRC)

LA County Motion

At the press conference, Supervisor Solis announced an LA County motion in support of the Consumer Financial Protection Bureau (CFPB) implementing strong federal rules to better protect consumers from harmful lending practices by payday, car title, and high cost installment lenders. The motion was approved unanimously the following week, making Los Angeles County the largest county in California (and the US) to pass a motion supporting strong rules by the CFPB to better protect consumers from predatory lending.

Supervisor Solis explained: “This motion is an important way for the Los Angeles County Board of Supervisors to demonstrate that we believe protecting families and their pocketbooks is good public policy and that we strongly support the CFPB finalizing a rule that will prioritize borrowers over ill-gotten profits.”

Community Leaders

Rabbi Joel Thal Simonds, associate program director at the Religious Action Center of Reform Judaism, opened the event. He explained: “The words of Exodus 22:24 remind us that ‘If you lend money to My people, to the poor among you, do not act toward them as a creditor; exact no interest from them.’ We seek a just and caring society in which those in need are not set on downward spiral of debt and hopelessness. That is why we must stop the abusive practice of payday lending which profits off the hardships of those living paycheck to paycheck. ”

Borrowers Discuss Their Experiences

During the press conference, former payday loan consumers also spoke about their experience with the so-called “payday loan debt trap.”  The “debt trap” refers to the fact that most payday loan borrowers are unable to repay their first loan when it comes due two weeks after they got it. So, they are forced to roll over or renew the loan, often multiple times, and they are paying an average APR in California of 366% when borrowing these loans.

Christina Griffin explained:

“When I had a financial emergency, I thought I could use a payday loan once and be done with it. Instead, I couldn’t pay back the loan two weeks later- and also be able to pay my other expenses. So, I had to keep rolling over my payday loan- which meant more and more fees and less money for other things- like groceries. As a former customer who survived the “debt trap,” I’m urging the CFPB to put a stop to this “debt trap” for future borrowers.”

Rosa Barragán shared her story of getting caught in a long term cycle of payday loan debt when she took out a loan following the passing of her husband.  You can read more of her story in La Opinión’s article about the press conference: Exigen mano dura para las compañías de ‘payday loans’.

rosa-barragan-photo-credit-chair-solis-office

Rosa Barragan speaking

Pit of Despair Art Installation

In addition to the press conference, a visually stunning, life-sized 3D art installation, the “Pit of Despair” was unveiled.  It was created by an artist named Melanie Stimmel and the team at We Talk Chalk, and it is a graphic illustration of how payday lending really works. The interactive art display has traveled around the country to visually demonstrate the “debt trap” that the majority of payday loan borrowers find themselves in when they are unable to make a balloon payment to repay their loan two weeks after they receive it. As a result, most borrowers renew their loans repeatedly (incurring more charges each time), which has been labeled the “payday loan debt trap.”

Putting finishing touch on Pit of Despair- thanks Americans for Financial Reform!

Putting finishing touch on Pit of Despair- thanks to Americans for Financial Reform for sharing it!

The Negative Impact of Payday Loan Stores in Los Angeles
Los Angeles County is home to approximately 800 payday loan storefronts, by far the most of any county in California. Because of the structure and terms of payday, car title, and high-cost installment loans, they worsen the financial position of most borrowers. Research has found that lenders are disproportionately located in communities of color, and are a net drag on the overall economy.

Bill Allen, CEO of the Los Angeles County Economic Development Corporation, explained the impact  of payday loan fees recently in an LA Daily News OpEd:

“These “alternatives” drain low-income residents’ scant savings. More than $54 million in check-cashing fees and $88 million in payday loan fees each year are paid by county residents. If those consumers had better financial services options, much of that $142 million could go toward building household savings, thus increasing economic stability for their families and communities.”

Gabriella Landeros from the Los Angeles County Federation of Labor explained: “Working families deserve better than the harmful financial products peddled by these lenders, and we join the LA County Board of Supervisors in urging the CFPB to finalize and enforce a strong rule to protect consumers.”

Liana Molina, director of community engagement at the California Reinvestment Coalition, helped organize the event and coordinated with the StopTheDebtTrap team at Americans for Financial Reform to bring the “Pit of Despair” art installation.  She explained:

“The payday loan industry advertises their loans as quick, one-time “fix” for a financial emergencies. In reality, these loans are designed to do the opposite. The majority of borrowers will end up renewing their loans repeatedly and incurring huge fees every time they do so. The CFPB can stop this “debt trap cycle” by implementing a strong rule that would require lenders to underwrite these loans, to determine that borrowers have the ability to repay without having to re-borrow or default on other expenses.”

CRC extends a big thank you to the organizations that made the event possible:

East LA Community Corporation (ELACC),

LULAC – California,

New Economics for Women (NEW),

Mexican American Opportunity Foundation (MAOF),

Montebello Housing Development Corporation (MHDC),

Consumer Action,

Los Angeles County Federation of Labor, AFL-CIO,

Labor Community Services, AFL CIO,

Pacific Asian Consortium in Employment (PACE),

Asian Pacific Policy and Planning Council (A3PCON),

Multi-Cultural Real Estate Alliance for Urban Change,

Thai Community Development Center (Thai CDC),

Haven Neighborhood Services,

Korean Churches for Community Development (KCCD),

Koreatown Youth and Community Center (KYCC),

Public Counsel,

Religious Action Center for Reform Judaism, and

VEDC

Additional Background on the Impact of Payday Loans in California 

While fourteen states and the District of Columbia have interest rate caps of about 36% APR or less, California law allows for two-week, $300 payday loans at 459% APR interest.

The California Department of Business Oversight recently released two reports on payday lending, and car title and high cost installment loans.

A few stats are included below:

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

2) Average number of loans and average APRs: The average number of payday loans per customer was 6.5, paying an average APR of 366% (a 5% increase from 2014).

3) Repeat borrowers and “churning” of loans: Contrary to loans being advertised as a “one time fix for emergencies,” 64% of fees in 2015 ($53.53 million) – came from customers who had seven or more payday loan transactions during the year.

California Car Title 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.

Car Title report

Similar to payday loans, car title loans also generate a LOT of complaints- and create a lot of financial damage for consumers who use them.  In fact, new research from the Consumer Financial Protection Bureau finds that 1 in 5 car title loans will ultimately result in the borrower having their car repossessed. As Liana Molina, director of Community Engagement at the California Reinvestment Coalition commented: “At least car thieves don’t take half your income before stealing your car.”

The compilation below is similar to our Payday Lender Hall of Shame. We’ll be adding in stories about predatory car title lending below.

If you haven’t yet, you’ll want to weigh in on the CFPB’s new proposal to more strongly regulate payday, car title, and installment lenders. We have a website where you can do it: CFPB Comments.   We know the industry will be submitting a lot of comments about protecting their profits (at the expense of consumers), so it’s important the CFPB hear from you!

Beware of Payday Loan Wolves My husband and I scrambled to call banks, lawyers, and anyone we thought could help save this family’s house. Unfortunately, we were too late. The home had been foreclosed on and sold, and now she was about to lose her car, which she needed to get to work every day. We decided to go with her to the store to see if we could help, but there was nothing to be done. The lender that offered her help in her time of need set her up to fail.  June 30, 2016.

Borrowing with auto title loan puts vehicle at risk Liana Molina explains that in comparison to shady car title lenders, at least car thieves don’t take half your income before stealing your car. Newsday. Sheryl Nance-Nash.June 11, 2016.

“A few days later, this headline appeared in Utah: Pleasant Grove woman dies in crash while fleeing repo man, police say. The article explains: “Ashleigh Holloway Best, 35, was estimated to be traveling at least 70 mph on a 35 mph road when she smashed into a tree about 12:20 a.m. at 682 N. 100 East. She had to be extricated from the vehicle and was pronounced dead at the scene, said Pleasant Grove Police Lt. Britt Smith.” Why was she travelling this fast? She was being pursued by a repo man, who was trying to repossess her car on behalf of TitleMax, a car title lender.” Daily Kos: Predatory Lending is Literally Killing People (May 26, 2016)

“Like the idea of paying triple-digit interest rates on a loan, forking out more dough in additional fees and watching the repo man tow away your car? Auto title lenders have got just the thing.” CBS MoneyWatch: Another loan to steer clear of (May 18, 2016)

How does the debt trap work?  Watch this PBS NewsHour episode about T.J. McLaughlin, who had to take some time off work after a medical problem.  Short on money for bills, he borrowed $1,200 from a car title lender (North American Title Loans), at 300% interest rate.  But when he lost his job and was unable to make the payments on this loan, they took his car.

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.”

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.

North American Title Loans Repossesses Car from Injured Customer

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.

 

How does the debt trap work?

Watch this PBS NewsHour episode about T.J. McLaughlin, who had to take some time off work after a medical problem.  Short on money for bills, he borrowed $1,200 from a car title lender (North American Title Loans), at 300% interest rate.  But when he lost his job and was unable to make the payments on this loan, they took his car.

If you’re in California and have had a similar experience with car title, payday lender, or high-cost installment loans, please share it with CRC (Click on this link to share your story- it only takes 3 minutes).

The CFPB (Consumer Financial Protection Bureau) is writing rules about high-cost payday, car title, and installment loans. By sharing your experience, you can help the CFPB understand how to make these products safer.  Ultimately, that can mean fewer people going through financial heartaches like the one TJ McLaughlin experienced.

Here’s 7 Reasons Payday Lenders Are Worried About Their Profits

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 Pay to Play

1. They’re spending a LOT of money on politicians BUT money can’t always buy you love

The payday lending industry has always “invested” gobs of money in politicians and elected officials as a way to fight off state-level regulation.  According to a new report from Americans for Financial Reform, the industry must be really worried. They spent over $15 million in campaign contributions during the 2013-14 campaign cycle. Some notable recipients include Representative Debbie Wasserman Schultz from Florida who received $31,250.  Wasserman Schultz later signed onto a letter with her Florida colleagues, suggesting that the CFPB shouldn’t make payday lending rules too restrictive.  In response, more than 20 Florida organizations that actually work with people who use payday loans (and see the damage caused by them), wrote a letter to the Florida delegation, reminding them that contrary to the marketing of these loans, the reality is that 63% of payday loan customers in Florida take out 12 or more loans each year.

 2. Regulators are clamping down on their illegal practices:

“A huge payday lending operation based in Kansas City will be banned from offering any more loans under a $54 million settlement announced by federal regulators Tuesday.”  Firms accused of faking loans, draining bank accounts settle with feds

“The Consumer Financial Protection Bureau (CFPB) is suing the NDG Enterprise, a complex web of commonly controlled companies, for allegedly collecting money consumers did not owe. According to the agency’s complaint, the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay, and falsely threatened consumers with lawsuits and imprisonment.”  Offshore payday lender hit with CFPB lawsuit

And, World Acceptance, one of the shadiest lenders out there, also recently shared that the CFPB is investigating it: This Payday Lender Is Being Investigated by the CFPB, and the Stock Got Crushed

3. People don’t like payday loans, in fact, 75% of people want stronger regulation of them.

The more that people learn about payday loans, the more they support regulation of them.  For example, a recent survey by the Pew Charitable Trusts finds that 75% of respondents believe there should be more regulation of payday loans.  This is an increase from 72% of respondents surveyed in 2013.
Did we mention that there have been 95 newspaper editorials written AGAINST payday lending in the past year and a half?

 

4. The gloves are off in exposing payday loan financiers

 The HuffingtonPost broke the story that a new project run by Allied Progress will expose secrets of the payday lending industry- and who profits from it:

“We’re going to do the hard work to expose who these people are and their links to some big corporations and individuals who would prefer to stay in the shadows,” said Frisch. “We’re looking at all types of predatory lending, payday loans, car titles, check cashing, bank fees. Nothing is off the table, both nationwide and in the states, if we see that we can make an impact.”

Read more here: New Project Seeks To Unmask Shadowy Payday Lenders

Another excellent resource for unmasking the folks that profit off of the payday loan debt trap and other shady companies is a website created by Unite Here, called “Loan Shark Funds”, nicknamed after the “Lone Star Fund” that is investing in payday lenders like DFC Global, which it purchased in December 2014.

Take a look: LOAN SHARK FUNDS website:

Lone Shark Funds

5. Companies are heading for the exit doors

Some companies like EZ Corp are seeing the writing on the wall.  The more people learn about payday, car title, and high cost installment loans, the less they like them.  The company announced in July 2015 that it is no longer going to originate payday, car title, or high cost installment loans.

6. Payday Money = Dirty Money  (can somebody please tell the politicians?)

Money made off of putting people in a payday loan debt trap is dirty money.  Take a look at this private school that announced it was returning donations from a payday loan company that is part of a settlement with federal authorities.

7. Banks don’t want to aid and abet this predatory profit model anymore

In this case, it’s a bank in Australia: “Westpac pulls out of funding payday lenders

According to a recent report from our allies Reinvestment Partners, (Connecting the Dots: How Wall Street Brings Fringe Lending to Main Street) there’s still some banks in the US that are willing to fund payday lenders.

Some of the largest banks include:

Wells Fargo ($WFC)

Bank of America ($BAC)

US Bank ($USB)

Capital One ($COF)

Read the report to see more excellent graphs and information like this one:

Wells Fargo Funding High Cost Consumer Loans

 

Did you like this post?   Check out a few of our other most popular payday lending posts:

95 Editorial Against Payday Lenders

CFPB Field Hearing in Richmond, Virginia Summary

The Payday Lender Hall of Shame