Payday Lending
in Louisiana

Statewide Issues Conference
February 15th, 2014
WHO?
HOW?

WHAT?
Who Uses a Pay Day Loan?
Families with children
Earning
$15,000 -- $40,000
per year
Disproportionately AfricanAmerican or Latino
Poor Credit Histor...
How many people take
out pay day loans in
Louisiana?
Payday loves Louisiana
23% of Louisiana households rely on
predatory lending
6th highest in
the nation

US Average: 18%

A...
Payday
Business
Model
Payday
Business
Model

Billions & billions
served

# of
McDonalds

# of Payday
Shops

12,800

20,600

230

936
Payday
Business
Model

= multiple repeat loans
and the debt trap.

Most payday loans go to
“immediate repeat borrowers”

N...
Payday
Business
Model

= multiple repeat loans
and the debt trap.

Most payday revenue comes from
“more loans per customer...
Payday
Business
Model

= multiple repeat loans
and the debt trap.

In the their own words …
“In any large, mature payday l...
Payday
Business
Model

= multiple repeat loans
and the debt trap.

In the their own words …
“The theory in the business is...
Debt
Cycle
Interest Rates
Annual Percentage Rate (APR)
Average
30-year mortgage
Student Loan
Auto Loan
Sub-prime mortgage
Credit Card...
How does this work?

?

?
?

?

?
How Payday loans carry triple digit
APR’s
Payday Loan Amount
$100
+ Interest
____+ 16.75%________
Amount owed
= $116.75
__...
Source: Louisiana Budget Project
People who take out a payday loan are

as likely to file for bankruptcy as people REJECTED for
payday loan

of people in B...
Payday hurts
our economy

Money taken in fees and
interest is money lost to
Louisiana families and
state economy

Amount i...
Payday hurts
our economy
Net jobs lost EACH YEAR because of
economic impact of payday lending

671 jobs lost
(per year)
So...
Where are Payday Loan
shops in my city?
Alexandria

# of payday
lenders
29

Source: Louisiana Budget Project
Shreveport / Bossier City

# of payday
lenders
78

Source: Louisiana Budget Project
New Orleans

# of payday
lenders
45

Source: Louisiana Budget Project
Monroe

# of payday
lenders
30
Lake Charles

# of payday
lenders
30
Lafayette

# of payday
lenders
39

Source: Louisiana Budget Project
Baton Rouge

# of payday
lenders
85
(State Capitol
of Payday)

Source: Louisiana Budget Project
How did this happen?
• Louisiana has “usury laws”, preventing loans
with interest rates higher than 12%.
• Louisiana legis...
What are other states doing?
GEORGIA
Regulates payday lending through legislative
action: cap at 16% APR interest.
– The r...
What are other states doing?
ARKANSAS
State Supreme Court ruled that Payday Lending
violates state usury laws
– Last payda...
What are other states doing?
TEXAS
Taking a city-by-city approach
– Dallas, Austin, San Antonio, and El Paso regulate
wher...
“Military Lending Act” (2007)
Prohibits payday lenders from charging APR’s
above 36 percent to active military personnel
a...
There ARE alternatives to Payday!
Examples:
Louisiana Federal Credit Union offers affordable,
short-term loan product:
– $...
HOUSE MEETINGS
Share a story about how debt has
affected you or someone you know?
Payday Lending in Louisiana
Payday Lending in Louisiana
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Payday Lending in Louisiana

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

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Payday Lending in Louisiana

  1. 1. Payday Lending in Louisiana Statewide Issues Conference February 15th, 2014
  2. 2. WHO? HOW? WHAT?
  3. 3. Who Uses a Pay Day Loan?
  4. 4. Families with children Earning $15,000 -- $40,000 per year Disproportionately AfricanAmerican or Latino Poor Credit History Need extra cash for emergencies and basic living expenses Social Security Recipients
  5. 5. How many people take out pay day loans in Louisiana?
  6. 6. Payday loves Louisiana 23% of Louisiana households rely on predatory lending 6th highest in the nation US Average: 18% About 57,000 Louisiana households take out payday loans per year Source: Louisiana Budget Project
  7. 7. Payday Business Model
  8. 8. Payday Business Model Billions & billions served # of McDonalds # of Payday Shops 12,800 20,600 230 936
  9. 9. Payday Business Model = multiple repeat loans and the debt trap. Most payday loans go to “immediate repeat borrowers” New loans made within a two week period 76% Loans to one-time users 2% Initial loans to repeat users 11% New loans after 14-30 day pause 6% New loans after 30 day pause 5%
  10. 10. Payday Business Model = multiple repeat loans and the debt trap. Most payday revenue comes from “more loans per customer”
  11. 11. Payday Business Model = multiple repeat loans and the debt trap. In the their own words … “In any large, mature payday loan portfolio, loans to repeat borrowers generally constitute between 70 and 90 percent of the portfolio, and for some lenders, even more.” – Community Financial Services of America (leading payday industry trade association)
  12. 12. Payday Business Model = multiple repeat loans and the debt trap. In the their own words … “The theory in the business is you've got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that's where the profitability is." – Dan Freeman, CEO of Cash America
  13. 13. Debt Cycle
  14. 14. Interest Rates Annual Percentage Rate (APR) Average 30-year mortgage Student Loan Auto Loan Sub-prime mortgage Credit Cards PAYDAY LOANS Up to 5% 8% 2% 8% 12% 23% 8% 15% 15% 36% 150% 782% Source: Louisiana Budget Project
  15. 15. How does this work? ? ? ? ? ?
  16. 16. How Payday loans carry triple digit APR’s Payday Loan Amount $100 + Interest ____+ 16.75%________ Amount owed = $116.75 ____16.75 % X 26 Two-week periods Two-week periods 1 year = 436% APR Plus fees of $10 PER LOAN brings APR to 696%!
  17. 17. Source: Louisiana Budget Project
  18. 18. People who take out a payday loan are as likely to file for bankruptcy as people REJECTED for payday loan of people in BR who file for bankruptcy do so, in part, because of payday loans Payday borrowers are as likely to have filed for bankruptcy in last 5 years Source: Louisiana Budget Project
  19. 19. Payday hurts our economy Money taken in fees and interest is money lost to Louisiana families and state economy Amount in payday fees and interest extracted from Louisiana families PER YEAR (2011 figures) $196,394,987 Source: Insight Center for Economic Development, “The Net Economic Impact of Payday Lending in the U.S.”, 2013
  20. 20. Payday hurts our economy Net jobs lost EACH YEAR because of economic impact of payday lending 671 jobs lost (per year) Source: Insight Center for Economic Development, “The Net Economic Impact of Payday Lending in the U.S.”, 2013
  21. 21. Where are Payday Loan shops in my city?
  22. 22. Alexandria # of payday lenders 29 Source: Louisiana Budget Project
  23. 23. Shreveport / Bossier City # of payday lenders 78 Source: Louisiana Budget Project
  24. 24. New Orleans # of payday lenders 45 Source: Louisiana Budget Project
  25. 25. Monroe # of payday lenders 30
  26. 26. Lake Charles # of payday lenders 30
  27. 27. Lafayette # of payday lenders 39 Source: Louisiana Budget Project
  28. 28. Baton Rouge # of payday lenders 85 (State Capitol of Payday) Source: Louisiana Budget Project
  29. 29. How did this happen? • Louisiana has “usury laws”, preventing loans with interest rates higher than 12%. • Louisiana legislature passed a law in 1990s EXEMPTING payday lenders from usury laws (“Louisiana Deferred Presentment and Small Loan Act”) • Legislature passed a law in 2010 allowing INCREASED FEES for payday loans. (Who do you think they’re hearing from?)
  30. 30. What are other states doing? GEORGIA Regulates payday lending through legislative action: cap at 16% APR interest. – The regulation decreased the number of individuals whose bank accounts were involuntarily closed due to repeated overdrafts by 11-16 percent ARIZONA In 2010, passed a cap of 36% APR, which specifically applies to payday loans.
  31. 31. What are other states doing? ARKANSAS State Supreme Court ruled that Payday Lending violates state usury laws – Last payday lending shop left the state in 2009. NORTH CAROLINA Regulated payday lenders in 2006 through legislative action. – Families saved almost $100 million/year – Former borrowers reported a “positive effect” on their personal finances
  32. 32. What are other states doing? TEXAS Taking a city-by-city approach – Dallas, Austin, San Antonio, and El Paso regulate where payday lenders operate, how they issue loans and what they charge in interest and fees. WASHINGTON STATE – Capped the total number of payday loans that can be lent to any individual from any company at 8 per year. – Number of annual payday loan transactions fell from 3.2 million to 856,000.
  33. 33. “Military Lending Act” (2007) Prohibits payday lenders from charging APR’s above 36 percent to active military personnel and their dependents. – The Pentagon found that military personnel collectively paid over $80 million of their salaries toward fees each year. – Department of Defense: “Predatory lending undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all volunteer fighting force.”
  34. 34. There ARE alternatives to Payday! Examples: Louisiana Federal Credit Union offers affordable, short-term loan product: – $300 loan, with max of 15% APR. ASI Credit Union offers “Stretch Loan” of between – $200 to $500 loan, with 12% APR. MORE PEOPLE use alternatives in states that regulate Payday Lending
  35. 35. HOUSE MEETINGS Share a story about how debt has affected you or someone you know?

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