Payday Lending in Louisiana Trapping Working Families in a Cycle of Debt 1 .

Payday Lending in LouisianaTrapping Working Families in a Cycle of Debt

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McDonald’s vs. Payday Lending

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McDonald's Payday Lenders0

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At least 20,600 payday loan currently open across the United States

941 active licensed lenders in Louisiana

1 payday lender for every 4,800 people

Over 4.1 million transactions made in 2008

Payday Lending is Big Business

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What is a Payday Loan? A loan between $50 to $350 Borrowers write a check for

the amount of the loan plus finance charges

Loans generally last two weeks

No credit checks or collateral Triple-digit APR amounts to

predatory business practices Customers caught in debt-trap

How the Debt-Trap Works

How the Debt-Trap Works

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Earn $15,000 to $40,000 annually Young, have at least a high school

education, have children, more likely to be divorced or separated

Disproportionately African-American or Hispanic

Poor credit history Used for emergencies (35.9 percent) and

basic living expenses including food, gas, medicine, utilities, or rent (21 percent)

Who is the Typical Borrower?

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1 to 2 3 to 4 5 to 6 7 to 8 9 to 13 14 or more0%

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Percent of Customers and Loan Frequency in One Year

Payday Loans Lead to Chronic Borrowing

Consequences of Predatory Lending

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Long-term indebtedness

Becoming a chronic borrower

Loss of bank account

Bankruptcy

Payday Lenders vs. Mainstream Banks

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New Orleans Baton Rouge Shreveport Lafayette Lake Charles Monroe Alexandria0

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Payday Lenders Mainstream Banks

Seventeen states and the District of Columbia effectively ban triple-digit interest rates

Eleven other states use online databases on all payday loan transactions

Experiences in Other States

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Over 5.0 Shops per 10K HH 2.0 to 4.9 Shops per 10K HH 0.1 to 1.9 Shops per 10K HH No Payday Shops

In 2006, stopped out-of-state lenders from making illegal loans

It took five years of advocacy 154 members of NC Coalition for

Responsible Lending Families saved almost $100 million per year Former borrowers report a “positive effect”

on personal finances

North Carolina

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In 2009, the last payday lender closed shop in Arkansas after a six year advocacy effort

Arkansans Against Abusive Payday Lending made up of 37 organizations

Arkansas Supreme Court ruled that the industry violated usury limit in the State Constitution

For more information, visit: www.stoppaydaypredators.org

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Congress banned payday lending to military personnel and their dependents

“[P]redatory lending undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all volunteer fighting force.”

Payday Lending and the Military

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Offers anti-predatory loan programs Stretch Plan Loan - a $100 14-day at ASI

would pay exactly $1.06 in interest – this contrasts with $39.17 the same borrower could expect to pay in interest to a predatory lender for the exact same loan.

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Louisiana Deferred Presentment and Small Loan Act

Maximum loans of $350 Fees no greater than 16.75%, up to $45 Documentation fee of $10 If a customer defaults, lenders may charge

36% interest for one year and 18 percent thereafter, or a one time delinquency fee

Prohibits rollovers, but allows refinances No limit on number of loans

Louisiana Regulations

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2006: HB 341 filed to prohibit payday lending. DEFEATED

2009: HCR 137 educates Louisiana citizens about the dangers of payday lending. PASSED

Legislature: payday loans are “prevalent among persons that are economically disadvantaged” and lead to “more economic hardship.”

Louisiana Legislation

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1. Cap finance charges for payday lenders at the equivalent of 36 APR

2. Limit loans to those already indebted to any payday lender for more than three months in the past year

3. Improve tracking and reporting through a database system

Recommendations

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