Don’t Fix What Ain’t Broke: Georgia’s Payday Loan Ban Works
Don’t Fix What Ain’t Broke: Georgia’s Payday Loan Ban Works Executive Summary
Payday lending is a national problem. Payday lending is not a Georgia problem.
In dozens of other states, where payday lending is legal, powerful payday lobbyists have convinced lawmakers to exempt their industry from existing state usury limits. Payday lenders in these states charge over ten times the interest that most banks and credit card companies are permitted to charge and they repeatedly roll-over loans, generating new fee income without extending new credit.
The fee income payday lenders make from rolling-over loans is the lifeblood of their industry. Loan fees cost borrowers in other states $4.2 billion annually. But not in Georgia.
For two years, Georgia consumers have been spared the crippling cost of paying triple-digit interest on payday loans. Georgia has saved its families over $350 million in hard-earned income since banning payday lenders in 2004. Most of that money would have otherwise gone into the pockets of out-of-state companies. Instead, working families have used it to pay for groceries, school supplies and heating costs.
Payday lenders prey on our neediest citizens. While payday loans are marketed for meeting emergency needs, only 1 in 100 loans are made to borrowers who use the product once in a year. Ninety percent of loans go to borrowers who have five or more payday loans per year, and nearly two-thirds of total payday revenues are extracted from borrowers who take out 12 loans or more per year.
These types of numbers led researchers at the University of North Carolina to conclude that “the financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers.”
In this report we find that:
* Georgia families save $147 million a year because the state’s usury rate cap prevents predatory payday lending.
* The existing small loan market in Georgia thrives—with consumer finance companies making $473 million in small loans each year.
* Allowing payday lending at triple-digit interest rates will only cause families to become trapped in a cycle of debt.
* Georgia should continue to successfully protect its families by upholding its 60 percent usury cap for small loans.(read full report)