Payday and Auto Title Lending Businesses

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Payday and Auto Title Lending Businesses

  1. 1. United Way of theBrazos Valley Financial Stability Committee Call to ActionConcerning Payday and Auto Title Lending Activities Alison Prince – Vice President Community Impact
  2. 2. Our Mission Statement: The United Way of the Brazos Valley brings the community together to find solutions that change people’s lives by advancing Education, Financial Stability and Health. United Way of The Brazos Valley
  3. 3. Call to Action Concerning Paydayand Auto Title Lending The members of the Financial Stability Committee advocate that the College Station City Council adopt a Resolution requesting the Texas State Legislature and the Governor of Texas take action to stop usurious lending by payday and auto title lending practices that exploit economically vulnerable College Station citizens. United Way of The Brazos Valley
  4. 4. Payday and Auto Title Loans Payday Loans Auto Title Loans• Small cash-advance • Car Title used as ($100 - $1,500) collateral• Two-week loan term • One-month loan term• Interest and Fees applied • Interest and Fees applied• Unsecured, but require • If borrower defaults, postdated check or lender can take the car electronic access to debit account as collateral United Way of The Brazos Valley
  5. 5. The Cycle of Debt: $500 Loan Pay $110 Fee Still Owe Entire Loan Principal ($500) Pay $110 Fee United Way of The Brazos Valley
  6. 6. Defective Products • Cycle of debt: • High fees are often paid month after month without reducing the loan amount. • Usurious rates: • Average APR of around 500% • Excessive fees: • Fees on a $4,000 auto title loan average $1,000 per month. • The average borrower paid $841.49 for a $471.31 loan in the first 3 months of the year United Way of The Brazos Valley
  7. 7. Texans Pay More On average, Texans pay $22 per $100 borrowed. United Way of The Brazos Valley
  8. 8. Doubled Statewide and Locally More storefronts statewide than McDonald’s andWhataburger’s combined! Bryan/College Station locations grew from 7 in 2004 to 13 in 2012 United Way of The Brazos Valley
  9. 9. College Station Statistics January – June 2012 in Bryan/College Station: • Almost 14,000 payday loan transactions • Borrowers paid approx. $1.3 million in fees alone • About 75% of payday borrowers refinanced at least once • Average # of refinances—2.88 in 3 months • 101 vehicles repossessed in Bryan/College Station • Over 17,000 vehicles repossessed statewide *Data compiled from OCCC Quarterly Data by MSA, 2012 United Way of The Brazos Valley
  10. 10. Families are Hurting• 83% of borrowers struggled to pay loan back when due*;• 77% said the loans make it harder to cover other bills*;• On average, borrowers are in debt for 212 days during the 1st year of a loan;• Nearly 20% of charitable cash assistance goes to borrowers in trouble with these loans;• 76% of borrowers seeking charitable assistance also receive a public benefit. *2010 Survey of Texas borrowers. United Way of The Brazos Valley
  11. 11. Local ExamplesSingle Mom, 5 Children Single Mom, 3 Children• Lost job – babysitting to • Monthly Income: $1,550 make ends meet • Has a $1,600 auto title loan• Receives Child Support: • Monthly payment to ~$1,000 continue loan: $370; nearly• Has 3 outstanding payday 24% of her monthly income loans totaling: over $3,400• Monthly payments on finance charge = $237; nearly 22% of her monthly income Clients of United Way’s Financial Fitness Center United Way of The Brazos Valley
  12. 12. City Resolutions and Ordinances • Regulatory Ordinances – Austin, Dallas, and San Antonio • Zoning Ordinances – Austin, San Antonio, Greenville, Irving, Little Elm, Mesquite, Richardson, Sachse • Resolutions – Bryan (2012), El Paso, Brownsville, Sachse, Rowlett, Arlington, Lubbock, Midland, Permian Basin Regional Planning Commission, Bexar County, Travis County United Way of The Brazos Valley
  13. 13. Call to Action Concerning Paydayand Auto Title Lending The members of the Financial Stability Committee advocate that the College Station City Council adopt a Resolution requesting the Texas State Legislature and the Governor of Texas take action to stop usurious lending by payday and auto title lending practices that exploit economically vulnerable College Station citizens. United Way of The Brazos Valley
  14. 14. A Resolution from College Station will: • Send a strong message to the Texas Legislature that they need to do more! • Affirm the rights of cities to rein in predatory lending practices by payday and auto title lenders United Way of The Brazos Valley

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