woodstock at woodstockins
03-13-2000, 04:46 PM
Hi everybody! FYI, the Woodstock Institute has just released a report
that disputes the key defenses of the payday loan industry.
The findings include:
For Many Borrowers Payday Loans are Not Occasional Short-Term Loans
Many borrowers use payday loans over relatively long periods. In
analyzing data collected by state regulators, the Institute found that
18 percent of the borrowers have three or fewer contracts. However, the
average number of contracts per borrower is 12.6. More than half (52
percent) of the borrowers have more than ten contracts, and more than
one-third of the borrowers have more than 15 contracts. Twenty-one
percent have more than 20 contracts.
Lower-Income People are Disproportionately Represented Among Payday Loan
Borrowers
The analysis of the state data shows that the typical borrower is a low-
to moderate-income person with annual earnings of $23,690. Only 12
percent of the borrowers earn more than $40,000 annually. Most of the
borrowers are female (62 percent) and rent their home (68 percent). The
analysis also finds that borrowers from lenders located in zip code
areas with higher minority populations have more contracts than
borrowers in mostly white areas.
The High Costs of Payday Loans are Not Justified
Lenders often attempt to justify their high rates by claiming excessive
default and loss rates. But a recent investment analysis of the industry
reported that the industry's losses have stabilized at 1.0 percent to
1.3 percent of the receivables, barely above bank default rates. The
unregulated market does not provide for fair prices. Borrowers are often
in desperate financial situations and unlikely to shop around for the
lowest priced loan.
Despite the industry's claims, the problems with payday loans are clear.
Effective action at the state or federal level to address the practices
of the industry should include limits on fees and interest rates,
cooling off periods between loans, limits on the number of loans during
a year, and increased regulatory oversight via monitoring and annual
reporting. Also, the ability of national banks to export the consumer
regulations of their home states must be stopped to allow states to
protect their residents from unfair credit.
For more information, contact Ms. Marti Wiles at Woodstock:
(312)427-8070. You can download the report from our web page:
www.woodstockinst.org. It's the first item on the what's new page.
--Katy Jacob
Research/Communications Associate
This post transferred from the cdb-l mailing list
that disputes the key defenses of the payday loan industry.
The findings include:
For Many Borrowers Payday Loans are Not Occasional Short-Term Loans
Many borrowers use payday loans over relatively long periods. In
analyzing data collected by state regulators, the Institute found that
18 percent of the borrowers have three or fewer contracts. However, the
average number of contracts per borrower is 12.6. More than half (52
percent) of the borrowers have more than ten contracts, and more than
one-third of the borrowers have more than 15 contracts. Twenty-one
percent have more than 20 contracts.
Lower-Income People are Disproportionately Represented Among Payday Loan
Borrowers
The analysis of the state data shows that the typical borrower is a low-
to moderate-income person with annual earnings of $23,690. Only 12
percent of the borrowers earn more than $40,000 annually. Most of the
borrowers are female (62 percent) and rent their home (68 percent). The
analysis also finds that borrowers from lenders located in zip code
areas with higher minority populations have more contracts than
borrowers in mostly white areas.
The High Costs of Payday Loans are Not Justified
Lenders often attempt to justify their high rates by claiming excessive
default and loss rates. But a recent investment analysis of the industry
reported that the industry's losses have stabilized at 1.0 percent to
1.3 percent of the receivables, barely above bank default rates. The
unregulated market does not provide for fair prices. Borrowers are often
in desperate financial situations and unlikely to shop around for the
lowest priced loan.
Despite the industry's claims, the problems with payday loans are clear.
Effective action at the state or federal level to address the practices
of the industry should include limits on fees and interest rates,
cooling off periods between loans, limits on the number of loans during
a year, and increased regulatory oversight via monitoring and annual
reporting. Also, the ability of national banks to export the consumer
regulations of their home states must be stopped to allow states to
protect their residents from unfair credit.
For more information, contact Ms. Marti Wiles at Woodstock:
(312)427-8070. You can download the report from our web page:
www.woodstockinst.org. It's the first item on the what's new page.
--Katy Jacob
Research/Communications Associate
This post transferred from the cdb-l mailing list