Description

Issue Brief for the RAISE Florida Network: The Payday Lending business in Florida published by: analysis Institute on Social and Economic Policy (RISEP), Center for Labor Research and Studies (CLRS), Florida Overseas University,

Overview Florida’s payday financing industry is a $2.85 billion company that traps borrowers in a period of financial obligation while additionally stripping a lot more than $244 million of Florida’s wealth (Veritec possibilities 2012). This report analyzes the commercial outcomes of Florida’s lending that is payday on its clients, our communities, and our state. Payday financing industry and its particular impacts on Florida: with over 1,600 shops, the payday financing industry has exploded into $2.85 billion industry within the greater part of Florida. In reality, across Florida there have been 7.2 million loans released in 2012 by payday lending companies distributed throughout North, Central, and Southern Florida (see dining dining dining table 1). The majority of loans that are payday in Florida were held in eight associated with the biggest areas when you look at the state. Nonetheless, populace size doesn’t appear to impact pay day loan task. Dining dining Table 1: Location of Payday Transaction by amount Region Transaction amount believed Wealth Stripped from percent charges 38.50percent $94,147,308 North 19.10% $46,706,846 Central 42.30% $103,439,769 Southern Source: Veritec possibilities LLC 2012 and writer calculations

The location aided by the best number of payday advances had been Pensacola, with Miami and Orlando in remote 2nd and 3rd spot, correspondingly. In accordance with the U.S. Census Bureau, the Pensacola metropolitan analytical area has a populace of approximately 455,000 in comparison to Miami’s local populace of 5.7 million (2014). Nonetheless, the Pensacola area ended up being house to 39.9per cent of all of the Florida cash advance transactions in 2012 while the greater populous Miami accounted for 17.8percent of payday deals. Since town populace dimensions are perhaps maybe perhaps not really a clear indicator of payday financing task it causes that the demographics connected with Pensacola’s populace might be driving its big share of payday financing deals. 1

dining Table 2: Location of Payday Transaction by amount area Transaction Estimated riches amount % Stripped from costs 7.70% $18,829,462 Ft. Lauderdale 2% $4,890,769 Ft. Myers 2.40% $5,868,923 Jacksonville 17.80% $43,527,846 Miami 13.30% $32,523,615 Orlando 39.90% $97,570,846 Pensacola 3.80% $9,292,462 Tampa 13% $31,790,000 western Palm Beach supply: Veritec Options LLC 2012 and writer calculations

Even though it is clear that the payday lending has an existing existence in Florida its financial effect on their state is less clear. The payday lending industry has real impacts on the Florida economy with 2.4 million borrowers across Florida. The $2.85 billion payday lending industry gathers a predicted $284 million in charges, profits for payday financing companies. How big is the payday financing industry is driven by loan “churning” as most borrowers restore loans and take another loan out within times of trying to repay that loan (Center for Responsible Lending 2013). This money-spinning industry hinges on poor state laws that enable payday financing businesses to charge a typical yearly portion price (APR) of 280per cent for the two-week loan. Payday Lending’s Wealth Stripping Effects: By capping the interest that is maximum the pay day loan industry may charge at 36%, policy manufacturers could stop the wide range stripping of Floridians. In reality, in 2012 alone, the extortionate interest and charges charged by payday lending organizations stripped a lot more than $244 million of Florida’s wide range. This is $244 million that would have remained in the pockets of Floridians if the maximum interest charged by payday lending businesses were capped to 36% APR in concrete numbers. Table 3: Payday Lending Industry Statistics # of Stores Total # loans projected cash advance Wealth Dollar Volume Stripping from costs 7,200,000 $244,538,462 $2,850,000,000 1,600 supply: Veritec Options LLC 2012 and writer calculations

Total Payday Charges

A better glance at the eight primary urban centers in Florida where payday financing deals are concentrated demonstrates that Pensacola suffered a calculated $97,570,846 in wide range stripping as decisive hyperlink a result of 280% APR charged by payday financing organizations. Residents of other metropolitan areas throughout Florida also destroyed vast amounts to your lending that is payday’s exorbitant costs (see figure 1). It’s important to observe that a limit in the optimum interest charged by payday financing organizations to 36% APR could be simple and economical means to fix the negative wide range stripping aftereffects of the lending industry that is payday. Also, a 36% APR limit would nevertheless offer payday financing organizations a lot more than $39 million in annual profits. Figure 1: Riches Stripping by Cities, Florida

Veritec possibilities LLC 2012 and writer calculations

Florida is regarded as 29 states without any significant regulation of payday lending. Florida has codified lending that is payday backed “best practices”—such as extended payment plans, rollover bans, and cooling-off periods—that supposedly ensure that borrowers aren’t caught in a financial obligation trap. But, research implies that the prevailing laws try not to work plus don’t stop the considerable degree of wealth stripping that Floridians are dealing with (Center for Responsible Lending 2013; National People’s Action 2012). 3

Payday lending debt trap: The payday financing industry was created to entrap borrowers in a continuing period of financial obligation. On average, payday financing clients borrow $391 and spend $42.11 in fees per deal. Which means that an average of, a lending that is payday in Florida costs an APR of 280%. The typical payday lending consumer utilizes 25% of the biweekly grow earnings on payday advances. Dining dining Table 4: Payday Debt pattern Average Average Fee Normal # Loan Charge per Loans per Amount Transaction Borrower each year