new data trends report on payday and auto title loans shows
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MediaContacts:KelliJohnsonorAnnBaddourTexasAppleseedkjohnson@texasappleseed.net,[email protected],ext.104512-473-2800
NewDataTrendsReportonPaydayandAutoTitleLoansShowsTexasBorrowersHitwithGrowingFeeChargesandIncreasingVehicleRepossessions
Analysisoffouryearsofstatedatashows34percentgrowthinfees,despitedeclineinnewloanvolumes;1in7autotitleborrowerslosevehicles
AUSTIN,Texas—WithproposedpaydayandautotitlelendingrulesfromtheConsumerFinancialProtectionBureauonthehorizon,TexasAppleseed,apublicinterestjusticecenterthatworkstobalancethescalesofjusticeforTexasfamilies,haspublishedawhitepaperanalyzingfouryearsofstatepaydayandautotitlelendingdatastartingin2012throughthenewlyreleased2015statedata.Themarketpicturesupportstheneedforreformsatthecity,stateandfederallevel.
“Thoughthedatashowimprovementsinsomepartsofthestate,Texasfamiliesoverallarepayinghigherfeesforfewerloans,”saidAnnBaddour,directorofTexasAppleseed’sFairFinancialServicesproject.“Autotitleborrowersarerefinancingathigherratesandaremorelikelytolosetheircars.”
Theanalysisexaminedfourloantypestypicallyfoundatpaydayandautotitleloanlocations:singlepaymentpayday,installmentpayday,singlepaymentautotitleandinstallmentautotitle.
TopDataFindings:
• Thisfour-yearanalysisshowsashiftingloanmarketdrivenbyhighfeesandrefinances.o From2012to2015,therewasa34percentgrowthinfeesacrossallloanproducts,despitea
9percentdropinnewloanvolume.o In2015,acrossallloanproducts,newloansmadeupjust29percentofthetotalmarket
volume,whilefeesandrefinancesmadeup71percent—atrendthathasstayedfairlyconsistentoverthepastfouryears.
o Whilethesinglepaymentpaydayloanmarketdeclined—from64percentofthemarketin2012to39percentin2015—installmentpaydaylendingincreased,leadingtohigherfeespaidbyborrowers.
o TheshareofautotitlelendingintheTexasmarketgrewfrom25percentin2012to34percentin2015.
• Acloserlookatthedifferentloanproductsshowsthatwhilesinglepaymentloanvolumeisdrivenbyrefinances,feechargesdrivetheinstallmentlendingmarket.
o Refinancesalonecomprised55percentofthesinglepaymentloanvolumein2015,whilefeescomprised53percentoftheinstallmentvolume.
o In2015,newsinglepaymentautotitleloanstotaled$353millionwhilerefinancesreachedover$1billion.
o Installmentpaydaylendingfeesincreasedby225percentfrom2012to2015—from$254millionto$827million—nearlytwicetherateofthedollarvalueofnewloans,whichincreasedby122percentduringthesameperiod.
o In2015,a$500installmentpaydayloancostborrowersatleast$1,300torepay—similartothecostofasinglepaymentpaydayloanwithanaverageoffivetosixrefinances.
• Autotileloanrepossessionsareontherise.o In2012,includingbothsinglepaymentandinstallmentautotitleloans,1in10borrowers
lostacartorepossession.In2015,itwas1in7.o In2015,amongjustsinglepaymentautotitleborrowers,1in5losttheircarsto
repossession.
Thebrightspotinthedataistheimpactofthecityordinances.Theunifiedordinance,adoptedbymorethan30largeandsmallTexascities,placesaffordabilitystandardsonthesetypesofloanswithintherespectivejurisdictions.IftheordinanceprovestohavestrongerborrowerprotectionsthanthefinalCFPBrule,thencityordinanceswillremaininplace.TexasAppleseedalsoanalyzeddatafromtwoMetropolitanStatisticalAreas(MSAs),wherenearlyallcreditaccessbusinesses(CABs)werelocatedinacitywiththeunifiedordinance.DatafromtheseMSAsshowedimprovementsinkeyoutcomemeasures,particularlyasubstantialdecreaseinthenumberofvehiclesrepossessed.
“Thisfour-yearanalysishelpsusseeafullerpictureofhowthemarketischanging,”saidBaddour.“WehopetheforthcomingfederalrulesfromtheCFPBarefinalizedandofficiallyadoptedintolawinatimelymanner,andthatthecityordinancescontinuetohelpensuretheseproductsarenotpullingstrugglingfamiliesdeeperintodebt.”
AboutTexasAppleseedTexasAppleseedisapublicinterestjusticecenterthatworkstochangeunjustlawsandpoliciesthatpreventTexansfromrealizingtheirfullpotential.Ournonprofitconductsdata-drivenresearchthatuncoversinequityinlawsandpoliciesandidentifiessolutionsforlasting,concretechange.Formoreinformation,visitTexasAppleseed.orgorthePaydayandAutoTitleLendingReformprojectpageatwww.texasappleseed.org/payday-auto-title-lending-reform.
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