California Reinvestment Coalition

California Reinvestment Coalition Respond to Troubling New Report About Payday Lending in California

Published July 07, 2017 13:17

New Dbo Report Find Ca Seniors Are Largest Group Of Borrowers


Sacramento, California-July 7, 2017--- Yesterday, the California Department of Business Oversight released a new report about payday lending in California which shows that seniors are now the largest group of payday loan borrowers in California, taking out just under 2.7 million loans in 2016, a nearly three-fold increase from 2015.

“This should be a wakeup call to the California legislature,” explains Liana Molina, director of Community Engagement at the California Reinvestment Coalition, which has advocated for stronger consumer protections against these loans. “We would like to know what’s behind this big increase in senior borrowing. Are lenders targeting their risky products to people who are on fixed incomes? What sort of payment plans are companies offering to seniors when they get caught in the payday loan debt trap of cyclical borrowing, as many of them inevitably will? And, will the California legislature finally stand up for consumers instead of protecting an industry whose profits are so clearly “earned” by causing financial harm, including to its newest target audience: Grandma and Grandpa?”

The report includes some positive news, including an overall reduction in the number of loans originated and fewer payday loan storefronts from the year before. 

However, other data points are troubling to consumer advocates:

1) Average APR increased: The average APR charged last year was a whopping 372%, an increase from the average of 366% charged in 2015.

2) 75% of profits were derived from borrowers caught in the “debt trap”: According to the DBO, 74.8% ($343 million) of the $458.5 million in fees collected on payday loans came from borrowers who took out seven or more loans. The number of people who took out 5 or more loans (899,285) far outnumbered the number who took out just one loan (403,441). Of subsequent transactions by the same borrower, the DBO report indicates that 63% were made on the same day the previous loan was “paid off.” The structure of payday loans, with high APRs and short repayment periods (two weeks) causes the majority of borrowers to take out new loans right after paying off their previous loan, which has been dubbed the “payday loan debt trap” by consumer advocates.

3) Bad Debt Skyrockets: There was a 54% increase in “charged off” (uncollectible) debt by lenders, totaling nearly $143.4 million, raising advocate concerns about lenders offering products they know are unaffordable.


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CRC has a membership of over 300 nonprofit organizations and public agencies across the State.