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90 million consumers save $2.2 billion each year without triple-digit interest loans


We read it, talk about it, even complain about it from time to time. But if you look close enough, the good news can still be found – like Olympic gold medalists of all colors winning in Rio, or a series of voter suppression laws ruled unconstitutional in several states.

And there’s even more good news on the financial front. New research finds that 90 million consumers are saving $2.2 billion each year. These savings didn’t come from pay raises or bonuses, or new jobs. Instead, these financial gains came when a pernicious form of predatory lending became illegal.

Let’s call these locales “shark-free” states where interest rates on small-dollar payday loans are legally limited to no more than 36 percent. Instead of living on financial tightropes from one payday to the next, these consumers are paying off bills and even saving some money on a regular basis.

Call me old-fashioned, but when bills are paid and I’ve still got money to call my own, I feel like things are going OK. I’m betting others do too. As one of my colleagues recently remarked, “When $2.2 billion of fees go away, who wouldn’t feel better?”

That colleague’s name is Robin Howarth, and she’s a senior researcher with the Center for Responsible Lending (CRL). She and another colleague, Delvin Davis, also a senior researcher are co-authors of the policy brief, Shark-Free Waters: States are Better Off without Payday Lending. Working together, the two of them found that consumers in payday-free states have found multiple ways to manage temporary cash shortfalls and at a fraction of the cost of payday loans. Their conclusions were informed by a series of academic studies, surveys and focus group results.

Contrary to the claims of industry supporters, consumers are satisfied with the respective state bans. In North Carolina, 9 out of 10 low and moderate-income consumers expressed that payday lending was not in their best interest. “They’re there basically to rob people that need money,” noted one North Carolina consumer.

According to another focus group participant from Arkansas, “I found that I really could do better without them. . . .I have actually paid off debts by a little at a time.”

As shared in earlier columns, consumers of color are especially hard hit payday lending’s debt trap. Earlier studies have shown that in states allowing payday lending, such as Florida and California, Black and Latino neighborhoods have twice the concentration of payday stores than their White counterparts.

On the positive side, other states now benefitting from consumer-friendly payday loan reforms are Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, Montana, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia. Among these states, 12 also limit interest rates for car-title loans, thereby further boosting consumer savings even further each year.

For example, in New York, the most populous state of the 14 with rate caps, consumers save a total of $789,995, 328 in combined fees for payday and car title loans. Lower but substantial savings were also found in Pennsylvania ($489,497,834), North Carolina ($457,729,960) and New Jersey ($346,587,204).

By contrast, where payday loans remain legal, borrowers pay fees of over $4.1 billion annually, with the average customer taking out 10 loans a year. The repeat borrowing cycle creates a debt trap for consumers that is easy to access but extremely difficult to retire.

Imagine what could happen if all communities and states became financially free of fees that bite your finances just as hard as a shark could in the ocean. The financial bleeding would stop and you’d likely gain real choices for things that have seemed like distant dreams.

“When payday loans are not available, a substantial portion of former payday borrowers in the range of 20-35 percent would immediately have access to either savings or mainstream credit as an alternative source of liquidity without applying for any new credit,” states the report. “There is also evidence that former payday borrows may be able to access new mainstream credit, perhaps because of improved financial condition combined with an increased willingness to search for new forms of credit after a payday ban.”

“We can only image that these significant savings to consumers bring about greater financial stability and are the measurable basis for consumer satisfaction,” added Howarth.

”Over the years, CRL’s payday research has focused on the ills of these predatory loans,” said Davis. “This policy brief points out the benefits consumers gained by limiting interest rates – whether by voter referendum or state legislation. Money stayed in their pockets, instead of paying high-cost fees.”

To borrow a line from a Samuel Jackson commercial, ‘What’s in your wallet?”

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at