Dont Be A TARGET

1
Dont Be A TARGET
Get the Facts!

• PAYDAY LOANS
• DONT PAY

2
Quick Loans

• Need Money?
• See Eddie!
• from the back door to main street!

PAYDAY LOANS DONT PAY
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Quick Loans Move to Main Street

• From Pawn Shops to Credit Cards
• 1990s A Quick Loan Explosion Rent-to-Own Plans,
  (Car) Title Loans, Tax Refund Anticipation Loans,
  Pay Day Loans target budget strapped consumers.

PAYDAY LOANS DONT PAY
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The Truth About Payday Lending

• The good, the bad, and the ugly
• MOSTLY UGLY

PAYDAY LOANS DONT PAY
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What is Payday Lending?

• Borrower writes check for loan amount PLUS huge
  fees (no credit check)
• Lender gives cash loan and holds check until next
  payday
• On due date
• Gives lender cash and gets back check, or
• Lets check be deposited, or
• Pays the finance charge to rollover loan
• Note Rollovers are illegal in Arkansas but
  lenders are allowing this to happen because of
  the little to no enforcement of regulations.

PAYDAY LOANS DONT PAY
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Costs

• According to the Consumer Federation of America
• 15 - 30 to borrow 100
• Average APR is 470
• Loans range from 100-700 PLUS the fee
• Loan term averages 14 days, but is always due in
  full on the next payday
• NSF fees for returned checks (from bank and
  lender)

PAYDAY LOANS DONT PAY
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Pay Day Loan Example (AR)

• Pay Period 1 Borrow 400 _at_ 400 APR for 14 days
  costs 67
• Pay Period 2 Rollover loan _at_ 67
• Pay Periods 3-6 Rollover loan _at_ 67/month costs
  402
• Now owe 802!

PAYDAY LOANS DONT PAY
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The Reality Cycle of Never Ending Debt

• At the end of the pay period, borrower can pay
  the loan in full, but often lacks funds to do
  so.the result
• Customer pays only the fee and rollsover the
  principal or
• Customer goes to another payday lender to cover
  the first payday loan incurring yet another fee

PAYDAY LOANS DONT PAY
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Who Uses Payday Loans?

• Steady income/benefits (required)
• Elderly
• Military
• Working families
• Likely users
• Younger
• Females Many Single-Parents
• Credit Constrained
• Little/No Savings

PAYDAY LOANS DONT PAY
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Arkansas Stance

• Arkansas Constitution - Article 19, Section 13
  sets a limit on interest charged on consumer
  loans not to exceed 17.00.
• Payday lenders charges are usurious according to
  the Arkansas Constitution.

PAYDAY LOANS DONT PAY
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ACT 1216 of 1999

• In 1999, the legislature passed Act 1216 that
  stated
• Amounts advanced shall not be deemed to be a
  loan.
• Fees charged for payday loans shall not be
  deemed interest.
• Law allows lenders to sidestep the usury
  provision.

PAYDAY LOANS DONT PAY
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Check Cashers Act (cont.)

• The law did contain some consumer protections
  including
• 1 loan per customer, per location with only one
  check (can not use more than one check to
  circumvent the maximum loan amount)
• Limiting the amount of fee permitted
• Maximum amount of loan - 400 (lenders are
  loaning up to 700 despite this regulation)
• No rollovers (although it is happening)

PAYDAY LOANS DONT PAY
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Are Payday loans constitutional?

• Absolutely NOT!
• Cases throughout the state have struck down
  payday lenders practices as usurious.
• There is a case pending in the Arkansas Supreme
  Court that will determine if the law is
  constitutional.

PAYDAY LOANS DONT PAY
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Crafty Payday Lenders

• Payday lenders have found ways around the
  protections of Act 1216 of 1999.
• Rent-A-Bank model
• Rent-A-Finance Company model
• Internet Rebate model

PAYDAY LOANS DONT PAY
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Economic Impact

• Wealth Stripping
• 67/pay period in fees less to spend on
  necessities
• 67/pay period x 1000 customers sweeps
• 67,000 to out-of-state banks In just 4 pay
  periods, 268,000 will have left the state
• One Result lower sales tax collections!
• Workforce Productivity
• Declines 20 (1 day/week) for workers with debt
  problems

PAYDAY LOANS DONT PAY
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Who Regulates Payday Loan Industry?

• Arkansas State Board of Collection Agencies,
  Division of Check Cashers

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Options

• Repeal Act 1216 of 1999 simple legislation will
  accomplish this
• Create new, tougher legislation to stop usurious
  transactions
• Establish alternatives to payday lenders
• Support on-going judicial action to enforce the
  Arkansas Constitution

PAYDAY LOANS DONT PAY
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Alternatives

• Start a savings account
• Be honest with creditors, i.e. need more time to
  pay
• Ask your employer for a salary advance
• Ask a close friend or relative to lend you the
  money

PAYDAY LOANS DONT PAY
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Dont Become a Target

• Be informed
• Be educated
• Know that PAYDAY LOANS DONT PAY!

PAYDAY LOANS DONT PAY
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GET INVOLVED!!!! STOP PAYDAY LENDING IN
ARKANSAS!!!!

• Join the Payday Loans Dont Pay Coalition!!!!
• Contact our Chairperson
• Paul Kelly
• Arkansas Advocates for Children and Families
• [phone]
• paul.kelly_at_aradvocates.org

PAYDAY LOANS DONT PAY