(And stop spamming us – promoted by Colorado Pols)
A new report from the Colorado Attorney General released Tuesday shows that payday loans are expensive products that trap borrowers in debt.
Almost two-thirds of all loans are taken out to refinance a previous loan. While borrowers may intend to use loans to cover an emergency, this data shows that most are unable to repay them when they come due.
Promoted as a source of emergency cash, payday loans fail to work as intended almost two-thirds of the time. If any other consumer product had a similar failure rate, it would be recalled.
Here are some of the details in the report:
• Sixty-one percent of all payday loans are “refinance-type” loans, either renewals or same-day-as-payoff loans that keep borrowers in debt to the lender.
• The average payday borrower took out eight loans from the same lender in the previous year.
• In 2009, the average payday borrower paid $475 in fees to borrower $367 for about 4.5 months.
•The average annual percentage rate on payday loans in 2009 was a whopping 343 percent.
• Just under half of all the loans issued went to borrowers who had taken out 12 or more loans in the previous 12 months, and just under a quarter went to borrowers who took out 16 or more loans in the same time frame. While these numbers are down from previous years, they still show that a significant portion of the loans trapped borrowers in long-term payday debt.
• The attorney general attributes the decline to the payment plan legislation adopted in 2007. While the data on payment plans shows they might have worked for some borrowers, only one out of seven loans eligible for a payment plan was converted to one.
• Most payday borrowers are single, a majority women, and their average age is 37 years old.
• Two-thirds are laborers, office workers or recipients of benefits such as Social Security
• Over 60 percent earn less than $30,000 in gross income per year.
This information is based on data gathered by the Attorney General’s staff during periodic compliance examinations of payday lending stores. It comes from consumer records at individual payday stores and does not control for the fact that most borrowers use multiple payday lenders. In fact, the industry’s own numbers say that borrowers go to multiple stores when juggling payday loan debt.
As a result, this data understates the number of loans the average borrower takes out, the total fees paid by the average borrower on payday loans and the number of loans a borrower took out in the previous year. This means that the debt trap is likely far worse than what is reflected in the Attorney General’s numbers.
This data appears in Payday Lending Demographic and Statistical Information, July 2000 through December 2009, released March 2, 2010, by the Colorado Attorney General. It is prepared by the Administrator of the Colorado Uniform Consumer Credit Code.
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Should that be year?
Also this:
really ought to be enough for just about anyone. I mean you can ignore it, you can pretend it doesn’t exist, you can deflect to something else, but I actually can’t imagine how you defend it with a clean conscience.
There’s no justification in the world for that extreme level of usury.
Should be outfront swinging on this.
This is a violation of Biblical commercial law.
But $30,000 per year does tend to make the point better!