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Washington Payday Lending Battles 2003-2010
NCLC Consumer Rights Litigation Conference October 26th, 2012
Bruce D. NeasColumbia Legal ServicesOlympia, [email protected]
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).
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.
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.
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)
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%).
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.
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.”
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 188 locations.• 2012: 52 payday companies with 151 locations.
