payday & auto title loans in texas a study by the league of women voters of texas education fund...
TRANSCRIPT
Payday & Auto Title Loans in Texas
A study by the
League of Women Voters of TexasEducation Fund
2014 - 2016Elizabeth Erkel, Study Chair
Focus: To explore the…• Accessibility and
impact of payday and auto title loans
&• Current
regulations on payday and auto title lenders in Texas
The League of Women Voters of Texas Education Fund 2
What are payday & auto title loans?• A small, short-term cash advance• Obtained within an hour from a• Storefront or• Internet site
• Bank account or vehicle title pledged for payment
3
What are the loans used for?
Basic living expenses, e.g., utilities, car payment, prescription drugs, school books & supplies
*E.g., medical emergency, car or house repair.**E.g., vacation, entertainment, gifts.
Unexpected expenses 16%*Something special 8%**
Other 5%Unknown 2%
The Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why, 2012, p. 14.
Why use a payday or auto title loan?
5References available upon request.
Who are the lenders?• Most are
independent, solo stores
• Average 3 employees
Offer small loans to those with an inadequate credit score or blemished credit report.
6References available upon request.
Who wants change?
• Texas Fair Lending Alliance
• Texas Municipal League
• Faith Leaders for Fair Lending
• Texas IMPACT• Center for
Responsible Lending
• The Pew Charitable Trusts
7References available upon request.
Accessibility in Texas
Texas Appleseed, 2014 8
Percent Households Using Payday & Auto Title Loans,by Recency of Use & Geographic Area, 2013
Last 12 Months Ever0
1
2
3
4
5
6
7
2.0
4.6
2.7
5.9
Payday Loans
United States Texas
% H
ouse
hold
s
Last 12 Months Ever0
1
2
3
4
5
6
7
0.9
2.7
1.7
4.6
Auto Title Loans
United States Texas
% H
ouse
hold
s
Federal Deposit Insurance Corporation, Custom Data Table Tool, 2013
Cost of a $500 Short-Term Loan, by Type,Maximum Charge, and State, 2015
State Maximum Charge Cost ($) APR
Single Payment, 2-Week Payday Loan
MinnesotaOklahoma
N. DakotaTexas
33% APR + $25<$301 = $15/$100 +
$301-$500 = $10/$10020% of principal + $0.50
10% APR + any fee
33.1065.00
100.50126.92
172%338%
523%660%
Single Payment, 30-Day Auto Title Loan
FloridaArizonaAlabamaTexas
30% APR15%/month25%/month
10% APR + any fee
12.5075.00
125.00137.36
30%180%300%310%
Sources listed in Facts & Issues References.
10
Estimated Biweekly Household Income & Expenditures for a Single-Parent/One-Child Family, Dallas-Fort
Worth-Arlington Metropolitan Area, 2014
Income Expenditures0
500
1,000
1,500
2,000
Payday LoanOtherMedicalTransportationChild CareFoodRentTaxes
Dol
lars
Expenditures
$1,060*$1,334
$627
$1,961
*Based on average hourly pay ($13.24) for sales and related occupations in the Dallas-Fort Worth-Arlington Metropolitan Area in 2014 (Better Texas Family Budgets, n.d.).
*
Texas Law • Interest*– 10% APR
• Consumer Loan fee limits**– 2-wk APR/$500: 310%– 1-mo APR/$500: 170%
• Credit Services Organizations***– Fee “as agreed upon
between parties”– Disclosure required
• Posting• Disclosure in writing
to consumer
12
*4 TEX. FIN. CODE § 342.004 **5 TEX. FIN. CODE § 393.601-602 ***4 TEX. FIN. CODE § 342.251-259
Cost ($) of a $500 Single Payment, Payday & Auto Title Loan,by Type Loan, Type Charge, & Texas Statute, 2015
Type of ChargeCredit Services Organizations *
ConsumerLoans **
Single Payment, 2-Week Payday Loan
PrincipalAcquisition feeLender interest (10% APR)
Total charges
500.00125.00
1.92126.92
500.0059.35
1.9261.27
APR 660% 319%
Single Payment, 30-Day Auto Title Loan
PrincipalAcquisition feeLender interest (10% APR)
Total charges
533.00133.25
4.38137.63
*** 533.0069.95
4.3874.33
***
APR 310% 167%
*5 TEX. FIN. CODE § 393.601-602. **4 TEX. FIN. CODE § 342.251-259. ***Includes $33 title lien fee.
13
City Regulation
• Business ordinances– 21 cities
• Land use ordinances – 11 cites
• Both– 3 cities
• 8 legal challenges– All dismissed
14Texas Municipal League, May 2015
Q: Do payday & auto title loans ultimately help or harm consumers?
A: The jury is still out!
15References available upon request.
16
• Is financially viable • Maintains access to credit• Safeguards consumers
How can the payday and auto title loan market be regulated so it:
