By Y. Jose. Tennessee Temple University. 2018.
For those consumers taking out more than two loans during the 12 month period 1 hour loan payday, an increasing share were attributable to transactions that are taken out on a sustained basis; that is my payday loan cash, within 14 days of the prior loan. Transactions taken by consumers with 3-6 loans in the 12 month period were about evenly split between continuous loans and loans that are either the initial in our study period or taken out after a 15 day or longer break after closing the previous loan. The majority of transactions conducted by consumers with at least 7 transactions a year were taken on a nearly continuous basis. Most frequently, these new transactions were opened within a day of a previous loan closing. Some of these data are used here to describe outcomes for consumers during a 12 month study period. Consumers included in this analysis had accounts that were either: (1) eligible to take an advance during the first month of the study period or (2) eligible during subsequent months if they had been eligible sometime during the quarter prior to the beginning of the study period. Based on these criteria, an equal number of accounts were randomly selected for each institution; hence the outcomes reported here can be thought of as averages across institutions, rather than outcomes for the underlying population of accounts that satisfied these criteria. About half of the institutions’ consumer deposit accounts were eligible for deposit advances. Our sample contains more than 100,000 eligible accounts, with roughly 15% of accounts having at least one deposit advance during the study period. We compare deposit advance users and consumers who are eligible for—but did not take—any advances, as well as deposit advance users with varying levels of use. However, consumers can take out multiple advances in small increments up to their specified credit limit prior to repaying outstanding advances and associated fees out of the next electronic deposit. Thus, merely observing the size of an individual advance without considering the number of advances taken before repayment may not fully capture the extent of borrowing. To provide a more meaningful representation of loan characteristics, we also analyzed each “advance balance episode,” defined as the number of consecutive days during which a consumer has an outstanding deposit advance balance. The median average daily balance of all advance balance episodes was $343, which is larger than the $180 median advance. This reflects the tendency of some consumers to take multiple advances prior to repayment. When a consumer takes multiple advances prior to a given incoming electronic deposit, each is subject to the same fee measured as a percent of the advance amount. We can also measure other account characteristics in our data, such as average daily balances, and how consumers transact from their accounts. An important part of our analysis was to compare how these types of account activity differ for consumers who use advances and for consumers who are eligible for deposit advances but do not use the product (“eligible non-users”). In general, these findings are measured on an average per-month basis for the months that the deposit account was open during the study period. Consumers in our study sample who took deposit advances had a median of just under $3,000 in average monthly deposits. While monthly deposits are not necessarily indicative of, or directly comparable to, monthly income (deposits can reflect money transferred into an account from other sources), average monthly deposits do reflect available resources. As compared to eligible non-users, consumers taking deposit advances tended to have slightly lower average monthly deposits. Consistent with lower deposits to the account, deposit advance users also tended to have a lower volume of payments and other account withdrawals than eligible non-users. The average dollar volume of consumer-initiated debits was measured for months during which the account was open. However, deposit advance users tended to conduct a larger number of account transactions than eligible non-users, particularly debit card transactions. The average number of consumer-initiated debits per month is measured for months during which the account was open. Deposit advance users tended to have much lower average daily balances than eligible non- users. This suggests that deposit advance users have less of a buffer to deal with financial short- falls (balances reported here include deposit advances that have been credited to a consumer’s deposit account). The average daily account balance for each account is measured for days during which the account was open. As previously explained, because consumers can take multiple advances up to their specified credit limit with repayment out of the next electronic deposit, measuring the number of advances is not necessarily an accurate means of measuring the intensity of use. For example, a consumer who takes out two advances each of $50 on successive days is not necessarily using the product more intensely than a consumer who takes out a single advance of $100.
Similarly faxing loan online payday, a particular consumer may obtain a covered longer-term loan with payments that exceed the consumer’s ability to repay at the time of consummation fax payday loan, but factors such as a lender’s use of a leveraged payment mechanism, taking of vehicle security, and collection tactics, as well as the consumer’s ability to access informal credit from friends or relatives, might result in repayment of the loan without reborrowing or other indicia of harm that are visible through observations of loan performance and reborrowing. For example, one lender may have default rates that are much lower than the default rates of other lenders because it uses 538 aggressive collection tactics, not because its determinations of ability to repay are reasonable. Similarly, the fact that one lender’s default rates are similar to the default rates of other lenders does not indicate that the lenders’ determinations of ability to repay are reasonable; the similar rates could also result from the fact that the lenders’ respective determinations of ability to repay are similarly unreasonable. The Bureau believes, however, that such comparisons will provide important evidence that, considered along with other evidence, would facilitate evaluation of whether a lender’s ability-to-repay determinations are reasonable. For example, a lender may use estimates for a consumer’s basic living expenses that initially appear unrealistically low, but if the lender’s determinations otherwise comply with the requirements of § 1041. Similarly, an online lender might experience default rates significantly in excess of those of peer lenders, but other evidence may show that the lender followed policies and procedures similar to those used by other lenders and that the high default rate resulted from a high number of fraudulent applications. On the other hand, if consumers experience systematically worse rates of delinquency, default, and reborrowing on covered longer-term loans made by lender A, compared to the rates of other lenders making similar loans, that fact may be important evidence of whether that lender’s estimates of basic living expenses are, in fact, unrealistically low and therefore whether the lender’s ability-to-repay determinations are reasonable. The Bureau invites comment on whether and, if so, how the performance of a lender’s portfolio of covered longer-term loans should be factored in to an assessment of whether the lender has complied with its obligations under the rule, including whether the Bureau should 539 specify thresholds which presumptively or conclusively establish compliance or non-compliance and, if so, how such thresholds should be determined. Payments under a covered longer-term loan Proposed comment 9(b)-3 notes that a lender is responsible for calculating the timing and amount of all payments under the covered longer-term loan. The timing and amount of all loan payments under the covered longer-term loan are an essential component of the required reasonable determination of a consumer’s ability to repay under proposed § 1041. Calculation of the timing and amount of all payments under a covered longer-term loan is also necessary to determine which component determinations under proposed § 1041. Proposed comment 9(b)-3 cross references the definition of payment under a covered longer- term loan in proposed § 1041. Basic living expenses A lender’s ability-to-repay determination under proposed § 1041. If a lender’s ability-to-repay determination did not 540 account for a consumer’s need to meet basic living expenses, and instead merely determined that a consumer’s net income is sufficient to make payments for major financial obligations and for the covered longer-term loan, the determination would greatly overestimate a consumer’s ability to repay a covered longer-term loan and would be unreasonable. Doing so would be the equivalent of determining, under the Bureau’s ability-to-repay rule for residential mortgage loans, that a consumer has the ability to repay a mortgage from income even if that mortgage would result in a debt-to-income ratio of 100 percent. The Bureau believes there would be nearly universal consensus that such a determination would be unreasonable. However, the Bureau recognizes that in contrast with payments under most major financial obligations, which the Bureau believes a lender can usually ascertain and verify for each consumer without unreasonable burden, it would be extremely challenging to determine a complete and accurate itemization of each consumer’s basic living expenses. Moreover, a consumer may have somewhat greater ability to reduce in the short-run some expenditures that do not meet the Bureau’s proposed definition of major financial obligations. For example, a consumer may be able for a period of time to reduce commuting expenses by ride sharing. Accordingly, the Bureau is not proposing to prescribe a particular method that a lender would be required to use for estimating an amount of funds that a consumer requires to meet basic living expenses for an applicable period. Instead, proposed comment 9(b)-4 would provide the principle that whether a lender’s method complies with the § 1041. The first method is to set minimum percentages of income or dollar amounts based on a statistically valid survey of expenses of similarly situated consumers, taking into consideration the consumer’s income, location, and household size. This example is based on a method that several lenders have told the Bureau they currently use in determining whether a consumer will have the ability to repay a loan and is consistent with the recommendations of the Small Dollar Roundtable. The Bureau notes that the Bureau of Labor Statistics conducts a periodic survey of consumer expenditures which may be useful for this purpose. The Bureau invites comment on whether the example should identify consideration of a consumer’s income, location, and household size as an important aspect of the method. The second method is to obtain additional reliable information about a consumer’s expenses other than the information required to be obtained under § 1041. The example would not mean that a lender is required to obtain this information but would clarify that doing so may be one effective method of estimating a consumer’s basic living expenses. The method described in the second example may be more convenient for smaller lenders or lenders with no experience working with statistically valid surveys of consumer expenses, as described in the first example.
The number of borrowers in Illinois taking vehicle title loans increased 78 percent from 2009 to 2013 best payday loan, the most 180 current year for which data are available instant payday loan. The number of title loans taken out in California 181 increased 178 percent between 2011 and 2014. In Virginia, between 2011 and 2014, the 175 Pew, Auto Title Loans: Market Practices and Borrowers’ Experience, at 1, 33 n. Community Loans of America has almost 900 stores and Select Management Resources has about 700 stores. Fred Schulte, Public Integrity, Lawmakers protect title loan firms while borrowers pay sky-high interest rates (Dec. In addition to the growth in loans made under Virginia’s vehicle title law, a series of reports notes that some Virginia title lenders are offering “consumer finance” installment loans without the corresponding consumer protections of the vehicle title lending law and, accounting for about “a quarter of the money loaned in 183 Virginia using automobile titles as collateral. The number of locations peaked in 2014 at 1,071, 52 percent higher than the 2006 levels. However, in each year since 2013, the State regulator has reported more licensed locations than existed prior to the State’s title lending regulation, the Tennessee 184 Title Pledge Act. Vehicle title loan storefront locations serve a relatively small number of customers. One study estimates that the average vehicle title loan store made 227 loans per year, not including 185 rollovers. Another study using data from four States and public filings from the largest vehicle title lender estimated that the average vehicle title loan store serves about 300 unique Lenders Law, at 13 (2014), available at http://www. Comm’n, The 2014 Annual Report of the Bureau of Financial Institutions, Payday Lender Licensees, Check Cashers, Motor Vehicle Title Lender Licensees Operating in Virginia at the Close of Business December 31, 2014, at 71 (2014), available at http://www. Because Virginia vehicle title lenders are authorized by State law to make vehicle title loans to residents of other States, the data reported by licensed Virginia vehicle title lenders may include loans made to out-of-State residents. Institutions, 2014 Report on the Title Pledge Industry, at 1 (2014), available at http://www. But, as mentioned, a number of large payday firms offer both products from the same storefront and may use the same employees to do so. In addition, small vehicle title lenders are likely to have fewer employees per location than do larger title lenders. Vehicle title loans are marketed to appeal to borrowers with impaired credit who seek immediate funds. The largest vehicle title lender described title loans as a “way for consumers to meet their liquidity needs” and described their customers as those who “often … have a sudden and unexpected need for cash due to 188 common financial challenges. The calculation does not account for employees at centralized non-storefront locations. The underwriting policies and practices that vehicle title lenders use vary and may depend on such factors as State law requirements and individual lender practices. As noted above, some vehicle title lenders do not require borrowers to provide information about their income and instead rely on the vehicle title and the underlying collateral that may be repossessed 193 and sold in the event the borrower defaults—a practice known as asset-based lending. The largest vehicle title lender stated in 2011 that its underwriting decisions were based entirely on 194 the wholesale value of the vehicle. Other title lenders’ websites state that proof of income is 195 required, although it is unclear whether employment information is verified or used for underwriting, whether it is used for collections and communication purposes upon default, or for both purposes. The Bureau is aware, from confidential information gathered in the course of its statutory functions, that one or more vehicle title lenders regularly exceed their maximum loan amount guidelines and instruct employees to consider a vehicle’s sentimental or use value to the borrower when assessing the amount of funds they will lend. An academic study found evidence of price competition in the vehicle title market, citing the abundance of price- related advertising and evidence that in States with rate caps, such as Tennessee, approximately half of the lenders charged the maximum rate allowed by law, with the other half charging lower 197 rates. However, another report found that like payday lenders, title lenders compete primarily on location, speed, and customer service, gaining customers by increasing the number of 198 locations rather than decreasing their prices. Loan amounts are typically for less than half the wholesale value of the consumer’s vehicle. A survey of title lenders in New Mexico 199 found that the lenders typically lend between 25 and 40 percent of a vehicle’s wholesale value. At one large title lender, the weighted average loan-to-value ratio was found to be 26 percent of 200 Black Book retail value. The same lender has two principal operating divisions; one division requires that vehicles have a minimum appraised value greater than $500, but the lender will lend 201 against vehicles with a lower appraised value through another brand. When a borrower defaults on a vehicle title loan, the lender may repossess the vehicle.
North Carolina regulators found 87 percent of borrowers roll over their loans; Indiana found approximately 77 percent of its payday loans were rollovers payday loan direct lenders only online. This is hardly surprising loan to payday, of course: if your finances are so busted that a doctor visit or car repair puts you in the red, chances are slim you‟ll be able to pay back an entire loan plus interest a few days after taking it out. All respondents to the 2008 survey indicated they had accessed at least one other form of credit. Unfortunately, the 2008 survey did not specifically ask borrowers to state if they had used two or more sources of alternative credit but the high overall result for alternative credit sources indicates it is likely that two or more other sources of credit is common. Of those who had accessed other forms of credit in 2002, the Centrelink Advance 74 payment was the most common type (20%) followed by credit cards (18%). By 2008, credit cards were easily the most common form of other credit accessed (62. This reflects the high proportion of low income earners among high-cost short term loan consumers. Certainly, the results indicate more high-cost short term loan consumers bear significant existing debts, which is consistent with the general, well- documented growth of consumer debt over the period 2002-2008. High-cost short term lending is increasingly utilised by consumers who have exhausted other forms of credit, rather than those who could not qualify for credit in the first place. The 2008 alternative credit results, particularly relating to credit cards, may reflect the increasing accessibility of consumer credit in the period 2002 to 2008. They may also indicate a widening of the high-cost short term lending market to encompass more of the lower middle class. It should be noted, however, that the 2008 proportion of consumers who had accessed a bank 75 loan actually dropped slightly from the 2002 figure of 11% to 9. Finally, the divergence in results may be more reflective of the alternative research methods adopted by the two studies, than any other factor. A table comparing the 2002 results to 2008 is presented below: Other Credit 2002 2008 Used None 40% - Credit Card(s) 18% 62. This, in turn, makes it extremely difficult to accurately measure the size of the industry or assess its rate of growth. This difficulty is exacerbated by the burgeoning online high-cost short term lending market, where new lenders have proliferated in recent years in a largely unmonitored environment. Further, most states do not require lenders to be licensed, so there is no single register of high-cost loan providers and no simple way to keep track of emerging new lenders. Thankfully, the National Consumer Credit Protection Act 2009 (Cth) will soon alleviate some of these difficulties by implementing a national licensing regime for consumer credit providers, to be supported by a new National Credit Code commencing from 1 July 2010. In the meantime, attempts at measurement must be undertaken by examining leading indicators and extrapolating out to form a broader picture. Although imperfect, this method at least provides some sense of industry development and forms the basis of the following chapter which attempts to gauge the size and growth of the high-cost short term lending market in Australia over the period 2002-2008. Primarily, the chapter draws inferences from the Consumer Action survey to examine apparent trends since 2002, particularly in relation to the number of lenders, the size of loans and the average length of repayment periods. Media and industry reports do provide some guidance concerning industry development although media reports often fail to distinguish between high- cost short term lending specifically and fringe lending generally, sometimes causing media sources to overstate the size of the high-cost short term lending industry. On the basis of the Consumer Action survey, Cash 76 Converters is the largest high-cost short term lender in Australia. Some inference can be drawn by examining the financial records of the company and extrapolating outwards, although this clearly represents a crude method of measuring industry growth and provides only a rough indication of the industry‟s potential size. Again, it is noted that any attempt to gain a truly definitive grasp of the high-cost short term lending industry in Australia is clouded by the recent rise of the online industry which appears to be growing quickly. On the above indicators, it appears clear high-cost short term lending occupies a prominent position in the Australian fringe lending market and has 77 grown significantly since 2002. Beyond assessing the scale of industry growth since 2002, the following chapter seeks to provide some explanation for that growth, by examining what have arguably been causal factors originating both from within the industry and from without. Such factors include the marketing strategies of high-cost lenders (and the extent to which they may have led to a degree of supply driven demand), consumer behaviour and the general economic and cultural context of the period since 2002. It is important to note the period covered was largely a period of strong economic growth during which the high-cost short term lending market grew substantially, despite being driven by the financial hardship of borrowers. As economic growth falters in the wake of more recent international economic events, it is possible an increase in financial hardship will lead to an even greater rise of high-cost short term loans.
Under this approach payday loan online fast, enforcement falls primarily to advertisers themselves loan no online payday check, and to state enforcement agencies. Unfortunately, payday advertisers have shown a willingness to disregard platform policies. State enforcers are not equipped to efficiently deal with an ever-shifting array of payday ads: they have no efficient, automated way of flagging ads for review by an ad platform. Moreover, they must divide their time between dealing with online ads, and payday lenders and lead generators themselves. The result is widespread violation of both the letter and spirit of ad platform policies by payday lead generators. Consumers see ads for payday loans nationwide, even consumers residing in states with protective lending laws. Ad platforms could choose to devote more resources to manually reviewing ads submitted by payday lenders and lead generators. For example, since 2009, Google has required that online pharmacy advertisers be certified by the National Association of Boards of Pharmacy before showing ads. Such an approach could be highly effective at preventing payday lending activities that violate state law. However, this approach would likely come at a significant cost, requiring the ad platform to create a human review team, or outsource review to another entity. Ad platforms could choose to adopt a new policy that would be easier to apply in an automated and consistent way. Alternatively, they could adopt a policy that prohibits payday loans ads in states that the platform (or another suitable arbiter) has identified as substantially restricting payday lending. For example, the Pew Charitable Trusts has classified state payday loan regulations into three categories, as follows: Illustrations from Pew’s summary of state payday lending laws. Ad platforms could automatically prevent the delivery of payday loan ads into the 24 “restrictive” and “hybrid” states, or merely prevent delivery of such ads into the 15 “restrictive” states. In either case, the ad platform would protect many consumers from seeing ads for potentially harmful loans that their states have chosen to prohibit. These policies would, to varying extents, curtail some activity that is clearly or arguably lawful. Importantly, a streamlined approach would allow for effective, automated, and relatively low-cost enforcement. The likely result would be more effective consumer protection, more meaningful company policies, and fewer users following ads to debt traps and financial fraud. The challenge of dealing with ads for The challenge of dealing with fringe financial products is still evolving, as evidenced by the fact that Facebook ads for fringe financial products only recently revisited its own payday ad is still evolving. Google, Bing, and other platforms have an opportunity to consider new approaches themselves. We urge ad platforms to engage with other stakeholders — including civil rights and 18 financial advocates — in considering their options. In our view, meaningful new limits on payday loan ads are feasible, and are consistent with the values already reflected in the policies of major online advertising platforms. Payday Lead Generators and Trade Groups Large payday lead generators could make and enforce stronger commitments to limit the sharing and use of consumers’ data. However, the guidelines are notably Industry guidelines could better permissive when it comes to the handling and resale of consumers’ data. And the guidelines recommend, but do not require, contractual limitations to protect leads as they move through the industry. However, these enforcement actions might demonstrate a need for closer attention to the payday lead generation industry’s handling of sensitive financial data more broadly. In the future, it could consider using its authority to prevent widespread sale of sensitive data without reasonable safeguards. Its jurisdiction includes lead generation companies that act as “service providers” to companies that offer consumer financial products or services. Eventually, the Bureau could also consider issuing rules governing the collection and resale of consumers’ financial data by service providers. The online lead generation ecosystem includes a variety of different actors, including online advertising platforms, commercial data providers, lead generation firms, and small affiliate marketers.