Report: Florida Payday Lending Law Traps Communities of Color in Endless Cycle of Debt

Payday lenders have stripped a staggering $2.5 billion in fees from Floridians since 2005. In 2015 alone, their shady lending practices yielded more than $300 million, according to a new report NCLR unveiled today with the Center for Responsible Lending (CRL).

The report, Perfect Storm: Payday Lenders Harm Consumers Despite State Law, highlights the failure of a state law that was designed to curb the negative effects of these debt trap lenders. To date it has had little effect and has been widely deemed a failure. Yet Florida’s congressional delegation has argued that the state’s payday regulations should serve as a model for a federal rule. This is despite the fact that under Florida’s code, payday loan stores have flourished while the communities of color they prey upon have fallen deeper and deeper into debt.

The images below give a sense of just how pervasive payday lending operations are in Florida communities of color. (click to enlarge)

As the report points out, the Deferred Presentment Act, passed in 2001, was supposed to provide relief for debt-trapped borrowers who use payday loans. However, a number of lender-designed provisions have enabled payday lenders to continue their predatory practices.

For customers who find themselves in desperate or emergency situations, a payday loan can seem like a lifesaver. The reality is that these lenders trap their customers in an unending cycle of debt, as the report shows. CRL analyzed 10 years of data on Florida’s payday lending market and they found an alarming amount of ineffectiveness of the current law:

• Over the entire 10-year period examined, the amount of business—number of transactions, total loan volume, and total fees—has consistently increased year after year.
• In 2015, payday lenders collected more than $311 million in fees from Floridians, a marked increase from $186.5 million in 2005.
• Trapped borrowers are the primary customers for lenders with approximately 83% of payday loans going to people stuck in seven or more loans per year.
• Interest rates on payday loans continue to be excessively high; the annual percentage rate (APR) of charge averaged 278%.
• Payday stores are concentrated in high-minority areas in Florida with approximately 8.1 stores per 100,000 people in heavily Black and Latino communities, compared to four stores for neighborhoods that are mostly White.

In our ongoing Truth in Payday Lending series, we’ve put a spotlight on some of the stories of borrowers who have fallen victim to these debt traps. People like Ayde Saavedra, who took out loans to fix her car. She has been unable to pay the initial loans and says she has no idea at this point how many times she’s had to renew. Ayde has experienced harassing phone calls, bankruptcy, and has been forced to go to local food banks to survive. Given the data from today’s report, it’s no wonder Ayde, and so many others like her, have endured such hardship.

They were set up to fail.

Federal agencies, however, are stepping in to help borrowers. This spring, the Consumer Financial Protection Bureau (CFPB) plans to issue a new rule that would crack down on the predatory practices that trap borrowers in debt. While some in Congress are pushing the CFPB to consider Florida’s regulations as the basis for a federal counterpart, NCLR and CRL both agree that the payday lending industry needs much strong regulations than what these lawmakers are advocating.

We are calling for a rule that will:

• Make affordability the standard for all loans, without exception. Do not allow loopholes for lenders to choose how they are regulated.
• Require lenders to consider a borrower’s ability to repay before providing a loan.
• Prevent borrowers from taking on too many loans too quickly.

You, too, can lend your support for such a rule and ensure that payday lenders are barred from further harming our communities.

Read the whole report and visit the NCLR website to learn more about our efforts to #StopTheDebtTrap.