Payday Lenders Don’t Want You to Read This

bank deposit advance loans

The Consumer Financial Protection Bureau, a federal agency that stands up for consumers is finalizing new rules for payday, car title, and high-cost installment loans. They want to hear from YOU about your experiences and recommendations for the loans. Please take two minutes to provide your insights by clicking here.    

The California Dept. of Business Oversight recently released new data about payday lenders and the damage they cause to California families.  Take a look at the data below.  It clearly explains how these loans create the so called “debt-trap” whereby people are forced to repeatedly roll over or renew their loans.

California Payday Lending Statistics

1) Total Number of loans:  Approximately 12.3 million loans were made in California in 2015 and the aggregate dollar amount of the loans was about $4.2 billion.

2) Average number of loans and average APRs: The average number of loans per customer was 6.5, paying an average APR of 366% (average APR increased 5% from 2014).[1]

3) Repeat borrowers and “churning” of loans: While these loans are advertised as a “one time fix for emergencies” the number of Californians who obtained 10 payday loans (462,334) was far greater than the number who only had one loan (323,870).  In other words, most borrowers aren’t using these loans for a “one time emergency.”

CA DBO new report number of transactions

4) Churning profits: 64% of fees in 2015 ($53.53 million) – came from customers who had seven or more transactions during the year.

Fees collected

5) Repossessions: 16,989 car title loans resulted in the consumer’s car being repossessed in 2015.[2] At the national level, the CFPB has found that 1 in 5 car title loans ultimately results in a repossession.[3]

6) Fees: California payday loan consumers pay over $507 million annually in payday loans and over $239 million in car title loans.  This ranks California in the #2 spot for highest amount of fees paid for car title and payday loans.[4]

7 Economic drain: Payday lending is an estimated $135 million net drain on California’s economy every year and subtracts 1,975 jobs.[5]

The California Reinvestment Coalition builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner.

You might also be interested in these payday lending posts:

Editorials Against Payday Lenders (As of July 2016, there’s been more than 150 editorials written from around the country about the financial harm caused by these lenders).

Payday Lender Hall of Shame This industry is known for spectacularly shady practices against its consumers. We’ve compiled some of the worst.

8 Reasons Not to Get An Online Payday Loan Is that really a lender’s website you’re on?  Or is it a broker who will re-sell your sensitive information repeatedly?

Data Sources:

[1] CA Dept. of Business Oversight press release, available at:http://www.dbo.ca.gov/Press/press_releases/2016/2016%20CDDTL%20Annual%20Report%20and%20Industry%20Survey%20Press%20Release%2007-06-16.pdf

[2] CA Dept. of Business Oversight 2015 CFLL annual report, available at:http://www.dbo.ca.gov/Licensees/Finance_Lenders/pdf/2015_CFLL_Aggregated_Annual_Report_FINAL.pdf

[3] Consumer Financial Protection Bureau press release, available at:http://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/

[4] Center for Responsible Lending report, available at:http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf

[5] Insight Center for Community Economic Development report, available at:http://ww1.insightcced.org/uploads/assets/Net%20Economic%20Impact%20of%20Payday%20Lending.pdf

How much is your EBT card costing you?

Problem: CalWORKs and other public assistance recipients paid $19.4 million in ATM fees in 2012 in order to access their benefits. About half of all Electronic Benefit Transfer (EBT) users pay a fee when they use their EBT card to withdraw their benefits.

Solution: This website is part of a broad campaign to reduce the amount of ATM fees charged to CalWORKs and other public assistance recipients because benefits should go to families, not bank fees. In addition to increased awareness of options like direct deposit, we’re also advocating that the state of California improve its EBT contract to incentivize the next EBT vendor to reduce ATM fees paid by recipients.

New Survey finds ATM Fees Are a Major Expense,  Major Hassle for Public Assistance Recipients

EBT Graphic

RESPONDENTS SHARE FRUSTRATION AT LOSING THEIR BENEFITS TO ATM FEES

Full report available here: “We don’t need to be charged for being poor.”

Oakland, California- May 2015- Earlier today, the California Reinvestment Coalition (CRC) released the results of a new survey of people who receive pay fees to use state-issued Electronic Benefits Transfer (EBT) cards for public assistance such as CalWORKs and General Assistance. The survey quotes the experiences of aid recipients including the impact of paying fees on their ability to make ends meet. It follows a previous report that found over $19 million in CalWORKs and other public assistance benefits are diverted every year to ATM fees charged to recipients in order to access their benefits.

CRC partnered with the California Community Colleges CalWORKs Association (CCCCA) and the Alameda County Social Services Agency (SSA) to survey 107 EBT card users to learn how their families deal with these fees, including what they do to try to avoid them, how the fees impact their families, and what they think should be done about these fees.

Andrea Luquetta, policy advocate with the California Reinvestment Coalition, and author of the report, explains: “People who rely on public assistance to make ends meet should not have to pay fees to access that aid. Through thus survey we are hearing for the first time on any scale the voices of people impacted by these fees. Their recommendations are clear. The state should provide more access to free ATMs, better access to direct deposit and support finding bank and credit union accounts that don’t charge excessive fees.”

Jessica Jones, a communications major at Sacramento City College, comments: “The fees are crazy- I was able to find an ATM that doesn’t charge fees, but it’s not nearby. So, it becomes a toss-up between making the trip to use the ATM that’s located far away but doesn’t charge fees, or using the ATM that’s convenient, but then losing some of your benefits to fees. I think the state should eliminate the fees altogether.”

Lori Cox, director of the Alameda County Social Services Agency, comments: “Undergirding all of SSA’s Asset Building work is the belief that economic injustice must be confronted wherever it is identified. Eliminating ATM surcharge fees for EBT users is one front in that battle.”

Participants cited strategies such as traveling further for fee-free ATMs, getting cash-back at a grocery store, or withdrawing large amounts of cash to avoid multiple ATM fees, but also noted the drawbacks of using these strategies.

A few of the survey findings are included below.  Full report is available here.

  • 27% of respondents report spending $15 or more (total) on ATM fees in the three months before the survey;
  • 72% of respondents said they didn’t know that direct deposit of their benefits into a checking account was possible and nearly 80% said that help setting up direct deposit into a bank or credit union account would be “very helpful” or “helpful” to avoid fees.
  • 67% of respondents said they were “interested” or “very interested” in learning about checking accounts that is free with direct deposit, has no overdraft fees, can be opened with $25, and is available to people who have been previously denied by other banks.

Additional Context

  1. In March 2014, CRC released the $19 million ATM fee, documenting the millions in public assistance benefits that are diverted every year to the nation’s largest banks, via ATM fees.  Over 40,000 people subsequently signed a Daily Kos petition calling on the banks to stop charging the fees.
  2. Several banks have committed to stop charging these fees, including Banc of California, City National Bank, Mechanics Bank, Rabobank and Tri Counties Bank.
  3. The state of California is re-designing its Request for Proposal for the vendor who administers the state’s EBT program. Recommendations for how this contract can be structured to reduce ATM fees charged to recipients is available here: CRC Recommendations.
  4. Earlier this month, Kansas governor Sam Brownback signed into law a requirement that welfare recipients are only able to withdraw $25 per transaction, a law that advocates have widely denounced as a poor tax, citing the dramatic increase in ATM fees this will mean for recipients, equivalent to a roughly 20% tax on their benefits.