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Texas Appleseed

Texas Appleseed. The Texas Market. Texas has 3300 payday and auto title locations across the state, in urban, suburban, and rural areas. Loan charges average 300%-600%APR . 3 of 4 borrowers rollover loans.

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Texas Appleseed

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  1. Texas Appleseed

  2. The Texas Market • Texas has 3300 payday and auto title locations across the state, in urban, suburban, and rural areas. • Loan charges average 300%-600%APR. • 3 of 4 borrowers rollover loans. • 17,000 cars were repossessed in the first half of 2012—nearly 1 in 10 borrowers lost their vehicles.

  3. Borrower Overview “It started out to help me over a temporary cash flow shortage and has turned into a five-year nightmare.” –Nancy Oliver, Denton, Texas • Loans are most often used for basic expenses, such as rent, utilities, and food. • Primary product appeal: speed, convenience, and guaranteed results 2009 Texas Payday Borrowers 2009 Texas Auto Title Borrowers Source: Texas Appleseed analysis of 2009 FINRA Financial Capacity Survey • Majority are 25-44 years old with incomes of $35,000 or less • More likely than general population to have credit score below 620 and no credit cards.

  4. Current Market Standards • Banks • FDIC 2005 examination guidelines : 6 rollovers • FDIC Suggested Standards: 36% rate cap with 90 minimum term • Credit Union • NCUA: 28% interest plus $20 fee (charged once per 6 months) • TCUC: 18% interest plus $20 fee (charged once per 180 days) • Texas Licensed Lenders • Licensed and examined by OCCC • $20 fee/18% interest or $10 fee/$4 per $100 borrowed per month • Must consider borrower ability to repay the loan on-time • Payday and Auto Title Lenders • Jan. 1, 2012: Licensed and examined by OCCC • Under CSO model, 10% rate cap, no fee cap • City ordinances in Dallas and Austin: 3 rollover/4 installment limit; 20% of monthly income; each payment must reduce principal by 25%.

  5. Emerging Lending Approaches • Bank/Credit Union • FDIC Pilot: Amarillo National Bank; First Convenience Bank • REAL Solutions: Fort Worth City Credit Union • Nonprofit • Lender Partner: Family Services of Greater Houston • Nonprofit Lender: Foundation Communities • Finance Company • Progreso Financiero • Community Loan Center—Employer Partnership

  6. Taking New Models to Scale • Basic standards for affordable credit to support fair competition in the small-dollar lending market. • Increasing participation of banks and credit unions in the small dollar loan space. • Replicating local nonprofit models. • Expanding models that can have statewide impact.

  7. Ann BaddourSenior Policy AnalystTexas Appleseedabaddour@texasappleseed.netwww.texasappleseed.net

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