(Ink by the barrel, payday loan spammers – promoted by Colorado Pols)
Today, the Colorado Attorney General’s office released its annual report of state payday lending activities. The report, which provides data for 2008, shows that although the overall number of payday loans and total amount borrowed decreased from 2007 to 2008, payday lenders are still profiting at the expense of Colorado consumers.
In 2008, the average payday loan grew by $7 and the average APR for each loan increased to more than 318 percent. Payday lenders often justify their excessive rates by claiming that they provide high risk loans. But the facts prove otherwise. Although consumers defaulted on 10 percent of payday loans in 2008, payday lenders aggressively limited their losses through the collections process. The actual charge off rate for payday lenders in 2008 was just 4.3 percent of the amount financed, a rate comparable to the 5.5 percent average charge off rate on credit cards in 2008. It’s lower than the charge off rate for 2007.
The data also indicate that payday loans are not a one-time only product. Many borrowers use multiple payday loans each year and more than 31 percent of all payday loans are simply renewed. In 2008, the Attorney General also reported that 36 percent of all payday loans were made the same day as loan payoffs. By combining the data it’s fair to conclude that more than two-thirds of all payday loans in Colorado are rollover or refinance type loans. This confirms a study released earlier this year by the Center for Responsible Lending that found that payday loans essentially create their own demand. It is important to note that the Colorado statistics only measure borrowers at a single location and don’t account for those that use multiple lenders. The number of repeat borrowers is actually much higher than reported.
The most important information contained in the Attorney General report relates to use of the payment plan option. State lawmakers enacted a provision in 2007 that requires lenders to offer information about a payment plan after the borrower’s fourth consecutive loan. Last year was the first full year to measure the effect of the new law. The result was predictable. Similar to the experiences in other states with payment plans, very few borrowers use them. More than 70 percent of lenders reported using tactics such as cooling off periods, threatened loan limits and cash only repayment requirements, to discourage borrowers from using payment plans. Although nearly one-third of all payday loans made in 2008 required payment plan notice, fewer than 7 percent were converted to payment plans. Only 4.8 percent of payday loans were successfully completed through payment plan agreements.
The payment plan failure makes one thing obvious. Payment plans are not a solution that helps borrowers leave the payday cycle of debt. Clearly, they are merely an industry distraction intended to forestall more rigorous regulation. Much more is needed to protect Colorado consumers from this usurious and harmful product.
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Democrats can disagree about many things, but this is a litmus test for me.
is your litmus paper?
Or Blue.
Nothing will really help us the consumer until the economy gets back out of this depression
predators and others to abuse consumers, but only until the economy improves
We’re probably already out of the recession according to traditional models; we probably left the recession in August or September.
Of course, that’s not a help to the underpaid worker who might use a payday loan service. If they decide to take out a loan, they get their meager earnings sucked up by one of these usurious leeches.
Correct me if I’m wrong…
Isn’t a recession “over” when the economy (GDP) starts growing again? It says nothing about being anywhere near the level we were before the recession hit.
So, if I fall off a cliff, on the way down I’m in a recession. When I hit the ground, I’m now stable, because I’m no longer falling. When the EMTs pick my carcass up off the ground, the recession is over (Yeah!) but the recovery is just beginning.
n/t
Good metaphor, and accurate enough.
Except you didn’t hit the ground; at the last minute you got halted by a poorly attached parachute; various body parts are in less than stellar shape, but at least the EMT has something to work with.
(No stimulus package = your scenario.)
just like the sub-prime mortgage con artists. And we’re all now paying for that, aren’t we?
I mean, he does get money from the payday lenders.
Re: GabbyX’s post…
Trying to disguise a link advertising your loan sharking services as a news story is cheap and almost certainly violates the Terms of Service for this site.
It’s good to know that payday lending companies are just as slimy in their Internet practices as they are in providing their primary “service”.
Thanks for signing up just to post that spam, Gabby – hope you enjoy your trip to the ban bin.