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Payday Lending in Louisiana Trapping Working Families in a Cycle of Debt 1 WWW.LABUDGET.ORG.

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Presentation on theme: "Payday Lending in Louisiana Trapping Working Families in a Cycle of Debt 1 WWW.LABUDGET.ORG."— Presentation transcript:

1 Payday Lending in Louisiana Trapping Working Families in a Cycle of Debt 1

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3  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

4  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

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7  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) 7

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9 9  Long-term indebtedness  Becoming a chronic borrower  Loss of bank account  Bankruptcy

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11  Seventeen states and the District of Columbia effectively ban triple-digit interest rates  Eleven other states use online databases on all payday loan transactions 11 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

12  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 12

13  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: 13

14  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.” 14

15  Offers anti-predatory loan programs  Stretch Plan Loan - a $ 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. 15

16  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 16

17  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.” 17

18 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 18

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