A presentation on Payday Lending in Louisiana. Shared at the Together Louisiana Statewide Issues Conference on February 15th, 2014.

1. Payday Lending
in Louisiana
Statewide Issues Conference
February 15th, 2014

2. WHO?
HOW?
WHAT?

3. Who Uses a Pay Day Loan?

4. Families with children
Earning
$15,000 -- $40,000
per year
Disproportionately AfricanAmerican or Latino
Poor Credit History
Need extra cash for
emergencies and basic
living expenses
Social Security Recipients

5. How many people take
out pay day loans in
Louisiana?

6. Payday loves Louisiana
23% of Louisiana households rely on
predatory lending
6th highest in
the nation
US Average: 18%
About 57,000 Louisiana households
take out payday loans per year
Source: Louisiana Budget Project

7. Payday
Business
Model

8. Payday
Business
Model
Billions & billions
served
# of
McDonalds
# of Payday
Shops
12,800
20,600
230
936

9. Payday
Business
Model
= multiple repeat loans
and the debt trap.
Most payday loans go to
“immediate repeat borrowers”
New loans
made within a
two week
period
76%
Loans to one-time
users 2%
Initial loans to
repeat users 11%
New loans after
14-30 day pause
6%
New loans after 30
day pause 5%

10. Payday
Business
Model
= multiple repeat loans
and the debt trap.
Most payday revenue comes from
“more loans per customer”

11. Payday
Business
Model
= multiple repeat loans
and the debt trap.
In the their own words …
“In any large, mature payday loan portfolio, loans to
repeat borrowers generally constitute between 70 and
90 percent of the portfolio, and for some lenders,
even more.”
– Community Financial Services of America
(leading payday industry trade association)

12. Payday
Business
Model
= multiple repeat loans
and the debt trap.
In the their own words …
“The theory in the business is you've got to
get that customer in, work to turn him into a
repetitive customer, long-term customer,
because that's where the profitability is."
– Dan Freeman, CEO of Cash America

13. Debt
Cycle

15. Interest Rates
Annual Percentage Rate (APR)
Average
30-year mortgage
Student Loan
Auto Loan
Sub-prime mortgage
Credit Cards
PAYDAY LOANS
Up to
5%
8%
2%
8%
12%
23%
8%
15%
15%
36%
150%
782%
Source: Louisiana Budget Project

16. How does this work?
?
?
?
?
?

17. How Payday loans carry triple digit
APR’s
Payday Loan Amount
$100
+ Interest
____+ 16.75%________
Amount owed
= $116.75
____16.75 %
X
26 Two-week periods
Two-week periods
1 year
= 436% APR
Plus fees of $10 PER LOAN brings APR to 696%!

18. Source: Louisiana Budget Project

19. People who take out a payday loan are
as likely to file for bankruptcy as people REJECTED for
payday loan
of people in BR who file for bankruptcy do so, in
part, because of payday loans
Payday borrowers are
as likely to have filed for bankruptcy in last 5 years
Source: Louisiana Budget Project

20. Payday hurts
our economy
Money taken in fees and
interest is money lost to
Louisiana families and
state economy
Amount in payday fees and interest
extracted from Louisiana families
PER YEAR (2011 figures)
$196,394,987
Source: Insight Center for Economic Development, “The Net
Economic Impact of Payday Lending in the U.S.”, 2013

21. Payday hurts
our economy
Net jobs lost EACH YEAR because of
economic impact of payday lending
671 jobs lost
(per year)
Source: Insight Center for Economic Development, “The Net
Economic Impact of Payday Lending in the U.S.”, 2013

22. Where are Payday Loan
shops in my city?

23. Alexandria
# of payday
lenders
29
Source: Louisiana Budget Project

24. Shreveport / Bossier City
# of payday
lenders
78
Source: Louisiana Budget Project

25. New Orleans
# of payday
lenders
45
Source: Louisiana Budget Project

26. Monroe
# of payday
lenders
30

27. Lake Charles
# of payday
lenders
30

28. Lafayette
# of payday
lenders
39
Source: Louisiana Budget Project

29. Baton Rouge
# of payday
lenders
85
(State Capitol
of Payday)
Source: Louisiana Budget Project

30. How did this happen?
• Louisiana has “usury laws”, preventing loans
with interest rates higher than 12%.
• Louisiana legislature passed a law in 1990s
EXEMPTING payday lenders from usury laws
(“Louisiana Deferred Presentment and Small Loan Act”)
• Legislature passed a law in 2010 allowing
INCREASED FEES for payday loans.
(Who do you think they’re hearing from?)

31. What are other states doing?
GEORGIA
Regulates payday lending through legislative
action: cap at 16% APR interest.
– The regulation decreased the number of individuals
whose bank accounts were involuntarily closed due to
repeated overdrafts by 11-16 percent
ARIZONA
In 2010, passed a cap of 36% APR, which specifically
applies to payday loans.

32. What are other states doing?
ARKANSAS
State Supreme Court ruled that Payday Lending
violates state usury laws
– Last payday lending shop left the state in 2009.
NORTH CAROLINA
Regulated payday lenders in 2006 through
legislative action.
– Families saved almost $100 million/year
– Former borrowers reported a “positive effect” on
their personal finances

33. What are other states doing?
TEXAS
Taking a city-by-city approach
– Dallas, Austin, San Antonio, and El Paso regulate
where payday lenders operate, how they issue
loans and what they charge in interest and fees.
WASHINGTON STATE
– Capped the total number of payday loans that can
be lent to any individual from any company at 8
per year.
– Number of annual payday loan transactions fell
from 3.2 million to 856,000.

34. “Military Lending Act” (2007)
Prohibits payday lenders from charging APR’s
above 36 percent to active military personnel
and their dependents.
– The Pentagon found that military personnel
collectively paid over $80 million of their salaries
toward fees each year.
– Department of Defense: “Predatory lending
undermines military readiness, harms the morale
of troops and their families, and adds to the cost
of fielding an all volunteer fighting force.”

35. There ARE alternatives to Payday!
Examples:
Louisiana Federal Credit Union offers affordable,
short-term loan product:
– $300 loan, with max of 15% APR.
ASI Credit Union offers “Stretch Loan” of between
– $200 to $500 loan, with 12% APR.
MORE PEOPLE use alternatives in
states that regulate Payday Lending

36. HOUSE MEETINGS
Share a story about how debt has
affected you or someone you know?