New Report find Predatory Lending is Growing in California

DBO Car Title Report

new report released earlier this month by the California Department of Business Oversight provides new and disturbing data about the growth of predatory lending in California.

Liana Molina, director of community engagement at the California Reinvestment Coalition released the following statement:

“Today’s report proves that while high-cost installment and car title loans are currently legal in our state, they are causing incredible financial harm for California borrowers.

For consumer loans greater than $2,500, there is no interest rate cap, and it’s clear the lenders are taking full advantage.

Sixty-five percent of loans for $2,500-$4,999 came with interest rates of 70% APR or higher (354,696 loans). For loans of $5,000 to $9,999, thirty percent of the loans (51,236) had interest rates of 70% APR or higher.

Also troubling is that the number of car title loans increased almost 10% last year in California. This is especially disturbing since car title lenders also reported to the Department of Business Oversight that they repossessed nearly 17,000 cars from their customers in 2015. Not only are these lenders originating unsustainable, high-cost, predatory loans, but thousands of people (about 15% of their customers) lost their main mode of transportation as a result of obtaining a car title loan. Even worse, of the 16,989 borrowers who had their cars repossessed, 10,357 of them had a deficiency balance, meaning the lender will continue to harass them for more money beyond just taking their car.

The Consumer Financial Protection Bureau (CFPB) announced new, proposed rules earlier this month that would create national, uniform rules for payday, car title, and installment loans. While the CFPB’s proposed rules are an excellent first step in curbing the many abuses we’ve seen from this industry, there remains several loopholes that we believe the CFPB should eliminate in the final rule.

How can I help stop predatory lending in California?

We are working with our members, allies, and consumers to urge the CFPB to implement a strong, final rule that has NO exceptions for the industry to exploit.

Join CRC by signing our petition and urge the CFPB to prioritize strong consumer safeguards and responsible lending, NOT predatory lenders.

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.

California Payday Loan Consumers Share their Experiences

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.

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How do California consumers who have used payday loans feel about them?

These are just a few of the many stories we’ve heard from consumers who have shared their stories with CRC:

1. MN from San Bruno, CA: “I am currently fighting online payday loans as we speak. I got in to a bind and had to borrow to make sure my daughter and I continued to have a roof over our head. These lenders take money on different days than what was agreed upon and don’t tell you all the fees that they will be adding into on top of the interest. I have one company that I can’t even access my “contract” and they never sent me a copy. If the vicious cycle doesn’t stop the best recourse people in this cycle will have is to file bankruptcy.”

2.  JF from Fresno, CA: “About two years ago I used a payday loan to assist with monthly expenses. I thought it would be easy to pay off but then I noticed I could not afford to pay the loan without securing another! The lenders provide little to no other option to pay back the loan which lets you know they aren’t concerned with helping you get through the hard spot they are more concerned with keeping you in the endless cycle to pad their pockets! Payday loans are BAD business!!!”

 3. SF from Oakland, CA: “In 2006 I was working full-time but when my boyfriend moved out I had to pay the entire rent myself and had trouble making ends meet. I started to use the payday loans and soon found myself in an endless cycle of debt, having to pay off two or more in cash every two weeks in order to get two more to cover my bills. The loan rates were outrageous and some of these franchises require you pay in cash instead of depositing your personal check. It took me a couple of years to get out of this cycle of debt and it kills me to think of all the money I lost on fees over those years. I will never use those services again. These companies are absolutely predatory and should be fully regulated and restricted since they profit from the people who can least spare the financial fleecing. Thank you.

4. JJ from Lamont, CA: No work, needed money to keep afloat and the lender made it to easy to get loan, a car title loan and it has been a nightmare, do yourself a big favor don’t ever get a title loan !

5. M from San Diego, CA: I have been caught up in payday loan for over a year now it’s taking all of my money and I don’t know how to get out help.

6. DD from Los Angeles: “I was in a difficult financial time in my business and needed a $2500 loan to cover my rent that was due. I had exhausted all my other options and wasn’t expecting any checks for a few weeks. I own my car and decided to go to Loanmart to get a loan. I called them up, told them what I needed and what kind of car they had. They approved me for $3000, even though I asked them for only $2500. Considering I was desperate for money, I went ahead with it, not knowing about the interest cap over $2500. Which I am sure they were well aware of and is why they urged me to get a higher loan.

So, after 2 years of paying, I have now given them over $4500, that’s $1500 more than the original loan. They say I still owe them $3000. For a total of $7500 due on a $3000 loan. Its highway robbery. These people are awful, they harass me all the time, lie to me about payment due dates and even on one occasion sent me to collections on a missed payment even though I had already paid it for that month from their 3rd party payment site (moneygram). I went and checked and the payment never went through. Which is very suspicious.

Now they are threatening to repo my vehicle. I don’t know what to do, this whole experience has been horrible. I am self employed and struggle enough getting by. I hope someone can sue them for these shady business practices. I will be more than happy to testify against them.”

 

8 Important Points from the CFPB Field Hearing on Payday Lending in Richmond Virginia

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.

Did you miss the CFPB hearing on payday and other high cost loans?  Not to worry, advocates and consumers from around the country testified at the hearing about their experiences with payday and car title loans and we’ve got the highlights below!

1) Ending predatory lending is a top priority of the CFPB and of President Obama: President Obama signaled the importance of putting an end to predatory lending in a speech he gave Thursday in Birmingham, saying, “As Americans, we don’t mind folks making a profit,” Obama said. “But if you’re making that profit by trapping hardworking Americans in a vicious cycle of debt, then you need to find a new business model. You need to find a new way of doing business.”

Watch President Obama’s speech here (payday lending starts at about 15 minutes in):

 

2) When consumers share their stories about payday and car title loans, it isn’t pretty:

ELLIOTT CALLOUT EMAILIt started with a broken ankle and a $500 payday loan. It ended in a three-year ordeal that cost Elliott – a Marine Corps veteran – his wife, and five daughters more than $30,000 and their house…read more here from the PICO National Network.

From a Guardian article about hearing: “I would tell anyone at this point: don’t do it. Do not do it. If I had known what I know now about payday loans, I never would have looked their way,” he said.   The Guardian: Payday loan borrowers: ‘When are we going to be done paying these people?’

Consumers also shared their experiences during the public comment period- below are retweets about the stories:Car Title borrower

payday borrower

New Economics For Women shared a consumer story that illustrates how the debt cycle works:

When Lorena (Alias), of Los Angeles, CA, found herself in a tight financial spot, she turned to payday lending….She visited a Speedy Cash location in Los Angeles, CA and borrowed $255, paying $45 in fees and hoping to be able to pay it back in two weeks time….Unfortunately, that was not enough time for her to stabilize her finances, and she had to repeat the loan. She has now repeated the loan 7 times, paying $315 in fees alone….Not only has she had to pay the added $315, she has also acquired overdraft fees. On five occasions, Speedy Cash has taken the money out of her bank account while she was still waiting on disability checks to come in, adding $175 to her expenses, due to payday lending….Hoping to catch up on some of her expenses and be able to get rid of the initial payday debt, she took out a second loan at Speedy Cash for $2,600. However, that loan did not help her at all and has instead dragged her deeper into the cycle of debt. In addition to the repeat loans every two weeks, Lorena now has to pay $38 every two weeks to repay the $2,600 loan. She has fallen behind on her bills and rent and has reached out to family and friends for help. Currently she owes Speedy Cash $2,755 and can only see that amount growing as time goes by.

3. Besides personal stories, research on payday and car title loans has found the products are toxic for the majority of people who use them- pushing them deeper into a cycle of debt.

From a new Pew research report on car title loans:

  • Between 6 and 11 percent of title loan borrowers have a car repossessed annually.
  • To repay a title loan, 47 percent report using a cash infusion, such as a tax refund.
  • 66% of car title borrowers believe the industry should be more regulated.

4. Advocates and practitioners advocate based on the stories and experiences of the people they work with:

Adam Rust, Research Director at Reinvestment Partners, spoke about his organization’s work in housing counseling and providing free tax preparation services.  He agreed that they see people facing difficult financial situations, but explained that paydayloans won’t right the ship- instead they’ll only cause people more hardship.

Paulina Gonzalez, executive director of the California Reinvestment Coalition explained in her testimony that “in many of our communities, we need more income, not just credit.”

5. People across the country are concerned about high cost lenders trying to use loopholes to escape regulations- or using cash to wield influence:

NC AFL CIO

lobbyists

6. While the industry tried to play the “we create jobs card” it turns out that’s not true either:

According to a report from the Insight Center for Community Economic Development, the payday loan industry was responsible for a net loss of over 14,000 jobs in 2011, and a net economic loss of over $750 million.  Bankruptcies that are triggered by payday loans were responsible for another $169 million net economic loss.

7. States like North Carolina and New York that got rid of payday lenders don’t want them back.  

Carlene McNulty, an attorney from the North Carolina Justice Center, commented that North Caorlina had kicked payday lenders out ten years earlier- and the state doesn’t want them back.

NY payday loans8. Communities notice where payday loan companies locate their stores- and where they don’t:

Where do payday lenders locate

 

Want to learn more about payday and car title loans?  We have a few resources:

1.Over 70 editorials have been written about payday lending- Has your local newspaper written one yet? Take a look: Editorials against payday lending  

2. 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?  Check out the Payday Lender Hall of Shame.

3. It’s not just payday loans that can be dangerous to your health- it’s also high cost car title loans and high cost installment loans too: Careful! Alternatives to Payday Loans Can Also Be Predatory

4. Thinking about an online payday loan?  Here’s 8 strong reasons not to! (hint: if you don’t like having your identity stolen, steer clear!)  8 Reasons Not to Get an Online Payday Loan

 

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

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

Careful! Alternatives to Payday Loans can also be Predatory

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.

 

The dangers of payday lending has captured the national spotlight, thanks to initiatives like Operation ChokePoint that are cutting off the enablers of illegal online payday loans, research from the Consumer Financial Protection Bureau that demonstrates the “debt trap” faced by the great majority of payday loan customers, and investigations and enforcement actions against payday lenders by the CFPB and other regulators.

While the CFPB is expected to start the rule-making process to regulate payday lenders this year, it’s important that consumers know that other lenders can be just as dangerous to your financial health- including car title loans, pawn shops, and rent-to-own stores.

We’ll be updating this post with stories about loans that are similar to payday loans, with high interest charges, short payback terms, and other loan features that hurt, rather than help consumers.

Alternatives to Payday Loans can also be Predatory

4. “I look at title lending as legalized car thievery,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento advocacy group. “What they want to do is get you into a loan where you just keep paying, paying, paying, and at the end of the day, they take your car.” LA Times: “More auto title lenders are snagging unwary borrowers in cycle of debt”

3. An examination of consumer complaints to state regulators about TMX and its InstaLoan stores shows that the customers are often teetering on the edge. One Floridian appears to have renewed her loan 17 times in 1 1/2 years. Another woman borrowed $3,100 and made $2,600 in payments, but after rolling her loan over seven times she still owed $3,900. Rather than keep paying, she surrendered her car to InstaLoan. A third customer had $886 in monthly income, according to her loan application. Just to renew her $3,000 loan would have required more than a third of her income. Rather than pay it, she, too, surrendered her car.

“I am 59 years old and disabled, and on a fixed income. I am unable to make such payments and they are threatening to repo my vehicle next week,” wrote a Pensacola woman.  Insta-Loophole: In Florida, High-Cost Lender Skirts the Law (Paul Kiel, Propublica, July 25, 2014)

2. In Mesa, the city’s older, heavily Hispanic west side has seen a swarm of auto-title lenders. Moving east toward traditionally higher-income areas, the number of title-lending locations drops off sharply.  “They look for cheap real estate or cheap rental space,” Mesa Councilman Dennis Kavanaugh said. “From a development perspective, I am unaware of any beneficial impact in any location they operate in. … They suck money out of a community and rarely, if ever, give back to the community in any way.”   Quick loans, or quicksand? Title lenders spread across SEV (Maria Polletta, The Republic, June 29, 2014)

1.  According to a 2011 investigation by the magazine Consumer Reports, rent-to-own stores generally charge customers the equivalent of a 100 percent to 300 percent annual interest rate.  For instance, it said, leading chain Rent-A-Center was offering an LCD television for $39.99 a week over a period of 104 weeks. That’s a total of $4,159, more than twice the television’s $1,890 retail price, Consumer Reports said. “Even a high-interest-rate credit card is a better option than rent-to-own,” it said. Alternative credit draws Mainers in, at heavy cost (J. Craig Anderson, The Portland Herald, June 22, 2014)

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.