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Washington Payday Lending Battles 2003-2010 NCLC Consumer Rights Litigation Conference October 26th, 2012

Washington Payday Lending Battles 2003-2010 NCLC Consumer Rights Litigation Conference October 26th, 2012. Bruce D. Neas Columbia Legal Services Olympia, Washington Bruce.Neas@columbialegal.org. Understanding the Product. Loan sharking, check kiting, bounced checks.

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Washington Payday Lending Battles 2003-2010 NCLC Consumer Rights Litigation Conference October 26th, 2012

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  1. Washington Payday Lending Battles 2003-2010 NCLC Consumer Rights Litigation Conference October 26th, 2012 Bruce D. Neas Columbia Legal Services Olympia, Washington Bruce.Neas@columbialegal.org

  2. Understanding the Product • Loan sharking, check kiting, bounced checks. • Payday lending illegal until authorized by the Legislature in 1996. Industry wrote the bill. • Payday lending grew out of check cashing. • 391% APR for a 14 day loan for $500. • Debt Trap- 91% of all payday loans made to repeat borrowers with five or more loans per year (CRL).

  3. The Situation in Washington-2004$793 Buys $325* • Payday Lenders= 713 (# of McDonalds=251) • # of Payday Loans= 3,297,012 • Volume of Payday Loans= $1,238,488,278 • Payday Loan Fees= $164 Million • These numbers continued to grow until 2010 reforms. *Typical Payday Borrower pays back $793 for a $325 payday loan from 2003 CRL Report.

  4. The “Legal” Payday Loan • Interest rate “caps” of 391% • $15 per $100 up to $500; $10 per $100 from $500-$700. • No minimum term. 45 Day Maximum Term. • Rollovers Legal-Repay the loan and immediately take out another loan.

  5. Building the Coalition • Consumer Advocates • Poverty Action • Labor • Military • Faith-based • Communities of Color • AARP • Social Service Providers & Advocates • Alliance to Prevent Predatory Lending (APPL)

  6. The History of the Campaign • 2003- Advocates propose 36% rate cap-Nothing. Industry responds with Repayment Legislation- Passes. • 2004-Advocates propose 36% rate cap-Nothing. Industry responds with Military “Best Practices”- Passes. • 2006-Congress passes Talent-Nelson Amendment for Military Borrowers • 36% rate cap and ban on check holding • Advocates continue pushing for same protections as military borrowers (36%).

  7. 2010 Payday Reforms-SHB 1709 • DFI to create database to regulate availability; • Limits of 8 payday loans in any twelve-month period; • Amount allowed on a payday loan is limited to 30% of a person's monthly income, or $700, whichever is less; • Prohibition on making payday loan if borrower has reached limit on amount allowed to be loaned, e.g. no more after $700 taken out; • Access to a 90- or 180-day repayment plan (90 days for under $400, 180 for over $400); • If borrower has repayment plan, no further loans.

  8. Other Protections • Payday lenders are prohibited from harassing or intimidating borrowers in the collection of a payday loan. • Loans made by Payday Lenders who are not licensed in WA are “uncollectible and unenforceable.”

  9. Impact of the Reforms • 2009: 3,244,024 payday loans totaling $1,336,028,845. • 2010: 1,093,776 payday loans totaling $434,111,743. • 2011: 855,829 payday loans totaling $326,673,119. • 2012: 909,570 payday loans totaling $342,989,751. • 2009: average length of a payday loan was 19.6 days. • 2010: average length of a payday loan was 28.6 days. • 2011: average length of a payday loan was 28.7 days. • 2012: average length of a payday loans was 26.7 days. • 2009: 109 payday companies with 603 locations. • 2010: 85 payday companies with 424 locations. • 2011: 68 payday companies with 188locations. • 2012: 52 payday companies with 151 locations.

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