Post on 25-Feb-2016
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Payday Lending in LouisianaTrapping Working Families in a Cycle of Debt
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WWW.LABUDGET.ORG
McDonald’s vs. Payday Lending
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McDonald's Payday Lenders0
100200300400500600700800900
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941
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%
5%
10%
15%
20%
25%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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WWW.LABUDGET.ORG
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