Published October 07, 2016 00:42
THOUSANDS OF CALIFORNIANS COULD BENEFIT FROM NEW FEDERAL RULES
San Francisco, CA October 6, 2016--- Citing the incredible financial harms caused to borrowers by payday, car title, and high cost installment loans, over 75 California organizations and elected officials submitted comments to the Consumer Financial Protection Bureau (CFPB), urging it to finalize a rule that will eliminate the so-called “debt trap” created by the loans. The CFPB is accepting public comments on the rules until Friday, October 7, 2016.
Liana Molina, director of community engagement at the California Reinvestment Coalition, which led the effort to secure input from the 75+ organizations and elected officials, explains: “When we put out this call to action, there was an overwhelming response from our members and allies who have seen people lose their income, assets, cars, bank accounts, and even their jobs as a result of a payday, car title, or high-cost installment loan. The CFPB should carefully consider input from community stakeholders who have witnessed or directly experienced the “debt trap” and finalize a strong rule with no loopholes.”
CRC's input on the final rule is available here.
In 2015, there were more payday loan borrowers in California who borrowed 10 or more loans as compared to the number of borrowers who took out only one loan, according to the California Department of Business Oversight. This data confirms advocate concerns about the “debt trap” created by these loans, and contradicts industry claims of consumers using the loans for a one-time emergency.
Kyra Kazantzis, directing attorney at the Law Foundation of Silicon Valley, coordinates a local coalition against payday lending, and adds: “Our coalition partners have worked directly with borrowers who’ve had their finances ruined by these loans. We hope the CFPB will act decisively to end the debt trap by releasing a strong, pro-consumer rule.”
Elba Schildcrout, director of the Community Wealth Department at East LA Community Corporation, comments: “Payday lenders siphon money out of local communities, routinely break the laws they’re supposed to be following, and have a well-deserved reputation as modern day loan sharks. We’ve seen firsthand the harm caused to borrowers stuck in the payday loan debt trap, and we hope the CFPB will act quickly to release and enforce a final rule that continues its trajectory of standing up for consumers and for responsible lending practices.”
Facts About Payday, Car Title, and High-Cost Installment Loans in California
1) APR is Increasing: In 2015, the average APR charged by payday lenders in California was 366% (a 5% increase from 2014).
2) "Debt Trap" is a Reality: In 2015, the average number of payday loans that a California borrower had was 6.5, contradicting industry claims about the loans being good for “one time emergencies.” In addition, the number of California borrowers who used 10 or more loans during 2015 was far greater than the number of borrowers who used only one.
3) Payday Lenders Subtract Jobs from California's Economy: Despite industry claims about “creating jobs,” the payday lending industry is actually an estimated $135 million net drain on California’s economy, subtracting 1,975 jobs annually, according to a report from Insight Center for Community Economic Development.
4) Repossession Because of Car Title Loans: One in five car title loan borrowers will ultimately see their cars repossessed as a result of obtaining their loan, according to new research from the Consumer Financial Protection Bureau. In California, car title lenders repossessed nearly 17,000 cars in 2015.
5) Profits from the “Debt Trap”: Payday lenders made 64% of their fees from their California customers who had 7 or more loans during 2015.
6) High Cost Installment Loans Are a Growing Problem: There is no interest rate cap for installment loans of more than $2,500 in California. In 2015, 65% of installment loans for $2,500 to $4,999 came with interest rates of 70% APR or higher (354,696 loans).
1) Video Testimony About Payday Lending: Edlyn Countee, a former payday loan borrower from the Bay Area, shared her experience getting caught in the payday loan “debt trap.” Her story is available here.
2) Oakland and San Jose Mayors Weigh in: Oakland Mayor Libby Schaaf and San Jose Mayor Sam Licardo weighed in with CFPB, urging a strong final rule. They joined nonprofits, religious leaders, and consumers who sent in letters. Please contact CRC for copies of letters.
3) Countless Legal Settlements: Despite claims of “caring about consumers and their access to credit,” payday, car title, and high-cost installment lenders have entered into countless settlements at the state and federal levels for violations and alleged violations of consumer protection laws. Lenders who have entered into settlements include Advance America, Ace Cash Express, LendUp, CashCall, Western Sky Financial, ACH Federal, Billing Tree, National Money Service, and many more.
4) Pictures Available: CRC has pictures available from our "Shark Week" protest at a payday loan store, a press conference in Los Angeles about the LA County Board of Supervisor’s resolution supporting strong CFPB rules, and more.