State Payday Loan Utilization Rate Highest in Country | New
THE CITY OF OKLAHOMA – Elise Robillard was in desperate need of a quick cash injection the first time she walked into a payday loan store.
A longtime substitute teacher and mother of two young children, Robillard’s tires were bald and she could not afford to replace them.
So she turned to small, short-term payday advances, believing they would keep her afloat. The loans have few financial qualifications, but annual interest rates of up to 391%.
More and more overwhelmed Oklahoma, like other Americans, are using cash advances to cover daily expenses – mortgages, rent, utilities or outstanding credit card debt, car repairs or medical bills, according to studies.
But unlike Americans living in other states, Oklahoma residents are using the loans at an incredibly high rate, analysts say.
In total, about 1 in 8 Oklahoma adults have taken out a payday loan – the highest utilization rate in the country, said Nick Bourke, director of consumer finance at Pew Charitable Trusts. The typical borrower takes out 10 payday loans a year, often relying on new loans to pay off old cash advances, he said.
Nationally, the average usage rate is closer to 1 in 20, Pew found.
“If you think about the main reasons people use payday loans in the first place… (Oklahoma utilization rate) may have something to do with the fact that there are a lot of people out there living from paycheck to paycheck in Oklahoma and not a lot of other programs in Oklahoma to help people achieve financial success, ”Bourke said.
Robillard, now 52, has spent her career teaching schoolchildren across the state as a longtime Norman resident. Even though her personal finances were in the red, the teacher said lenders continued to offer – and she continued to take – new loans. She used to take out loan after loan for almost two decades.
In total, she estimates that she took out between 90 and 110 different loans, including new ones to repay existing payday debts.
“It was a matter of survival,” said Robillard, who is moving to Wyoming because she couldn’t make enough money as a teacher in Oklahoma. “And once I got stuck in it, I couldn’t get out of it. The only way I could get out of this cycle, the predatory loan cycle, was to finally file for bankruptcy. We shouldn’t be setting up scenarios where someone can have a financial train wreck in their life. ”
Tackling vulnerable people
Critics argue that these companies are preying on low-income Oklahoma residents – many of whom may struggle to grasp the complexity of lending.
“There are no payday loan venues in Nichols Hills,” Oklahoma Prospect Church pastor Lee E. Cooper Jr. said, referring to an upper-class neighborhood of ‘Oklahoma City. “Where you find them are places where people have low to middle incomes. You prey on the most vulnerable people in predatory ways.
Payday loan stores dot the storefronts of busy malls scattered throughout the state’s urban and suburban communities. They offer an attractive lifeline to working-class Oklahoma residents, who are often in an unexpected accident of financial disaster or already underwater.
Serving a low-income community near the State Capitol, Cooper finds himself counseling parishioners on what he sees as the short-term loan trap.
“One of the biggest problems is that they don’t understand how the interest is compounded on these particular loans,” he said. “People just want immediate relief, and I think that’s what’s appetizing about payday loan practices.”
Most borrowers should be able to survive on their income, but somewhere along the way they’ve made bad financial decisions and see loans as their only viable option, Cooper said.
The average borrower is an hourly wage earner who earns about $ 15 an hour – or just over $ 30,000 a year – well above the poverty line of $ 24,600 for a family of four, said Bourke. Borrowers come from all walks of life, but the most common are young white mothers, he said.
“The typical person who takes out a payday loan ends up in debt for almost half the year and pays more in fees than they initially borrowed,” said Bourke.
Loan of lifebuoys
But payday loans are also lifesavers for many.
When State Representative Kevin McDugle needed to buy a refrigerator, he turned to a lender to advance the capital.
McDugle, a Republican military veteran of Broken Arrow, said the banks would not lend the money because the risk of default on such a small loan was too high.
“Without this company, I wouldn’t have been able to do it,” he said during a recent ground floor debate on the practice. He then declined to answer further questions about his experience.
He argued in the House that payday lenders charge such high interest rates because loans are inherently high risk and a good percentage is never repaid.
According to an analysis by Voices Organized in Civic Engagement, a coalition of Oklahoma congregations and nonprofits seeking to curb industry expansion, nearly half of Oklahomans default on their payday loans , compared to 3% of borrowers of standard bank loans.
“It’s just a vague notion, and you think, ‘Well, I could pay that back,’” said Kristen King, one of the group’s main organizers.
The group is not calling for an end to loans, but rather a lower interest rate cap and stricter enforcement by the state attorney general’s office against violators.
“We certainly believe there is a time, a place and a need for these loan products,” said Jamie Fulmer, senior vice president of Advance America, Cash Advance Centers Inc., which operates 67 locations across the country. ‘Oklahoma who grant thousands of loans each year.
Fulmer said the typical borrower comes from the “heart of the middle class” with incomes between $ 50,000 and $ 55,000. Ninety percent have a high school diploma. Half of them went to college. Almost 70 percent are owners.
Most of the 1.5 million consumers nationwide say they are “extremely satisfied,” he said.
State Representative Collin Walke, of D-Oklahoma City, said he couldn’t help but notice the number of Oklahomians who have been sued in Oklahoma County Small Claims Court for default. to their loan obligations.
A vocal critic of payday loans, Walke works as a lawyer when he is not in the legislature.
“You won’t see happy customers,” he said. “I think the reason they are so prevalent is that our economic situation in the state of Oklahoma is so dire. You have unemployed people. You have social services that have been cut to the bone so … they have to come and get money elsewhere.
State law allows Oklahoma residents to make no more than two loans of $ 500 each at a time. Payday lenders, in turn, can charge borrowers a maximum fee of $ 65 on a $ 500 loan, said Ruben Tornini, deputy administrator of the Oklahoma Department of Consumer Credit. The state agency monitors licensed payday lenders to make sure they are disclosing information correctly and are not charging excessive fees. His agency helps resolve Oklahoman complaints.
Tornini’s state agency primarily deals with complaints about unlicensed lenders – most of whom operate online and out of state, including tribal lenders who do not recognize state loan protections. . They are also the most difficult lenders to track and penalize.
“I think approved lenders certainly behave within the law the vast majority of the time,” Tornini said. “This is the exception to the (rule) that approved lenders or a brick and mortar (store) would not behave professionally.”
“A cycle of debts”
Loan laws vary from state to state.
Susan Hakel, a retired Oklahoma City family doctor, said she discovered the difference between state laws when her son borrowed $ 300 from an Arizona-based lender days before losing his use.
The lender – in an effort to collect the terms of the loan – accessed his son’s Oklahoma bank account up to three times a day. For each bad check, the loan company charged $ 35 and the bank $ 50, Hakel said.
Within weeks, Hakel said her son’s debt had more than quadrupled before they noticed what had happened, and she was able to work with the bank to shut down access to the account.
She said she did not know the name of the payday lender and requested that her son’s name not be used to protect his privacy.
Even after settling the bank debt, Hakel said he received threatening phone calls from people claiming to work for the payday lender for nearly six years. Debt collectors threatened to come to her home, take her away and throw her in jail, she said. The calls have recently ceased.
“It was a never-ending loop of increasing debt,” Hakel said. “It only took one bad thing to happen, and there was no way he could get away with it. What surprised me so much was how quickly it all happened. It was not a long, bloody story of months of bad financial decisions. It was a bad decision and… he fell off a cliff.
Pew’s Bourke said some states – such as those in the New England area – offer many programs that offer small loans and grants from government agencies to help people live from paycheck to paycheck. other, which can reduce the number of people who turn to payday loans. If Oklahoma doesn’t have one, that could explain the higher-than-normal usage, he said.
Caps on the number allowed could also help consumers, but the best solution is to force lenders to have affordable payments and allow borrowers to pay off debt over time, Bourke said. But, at the end of the day, it is up to state lawmakers to set the rules for how much lenders can charge and how much loans are allowed.
“Frankly, payday lenders employ a lot of lobbyists, and they are very fiercely defending the status quo and they resist change,” Bourke said. “It’s just really hard to break down that resistance to change in the industry to make a change that helps consumers. “