The list of regressive new laws enacted in North Carolina in recent years is a long and sobering one. In area after area, state leaders have pushed an agenda that has dis-invested in essential public services and structures, promoted discrimination, laid waste to the natural environment and expanded economic stagnation and inequality. Happily, if rather surprisingly, one area that has remained largely immune thus far to such a pattern is predatory lending. Despite the efforts of a fleet of corporate lobbyists, state lawmakers have thus far declined to roll back the state’s decade-long banishment of bottom-feeding “payday” loan shops.
“Payday lending is a high-cost loan product that is built on its ability to churn consumers through a cycle of debt, collecting fees for as long as possible.
Fortunately, 14 states and the District of Columbia have made a definitive statement to prohibit the high costs of payday loans by effectively enforcing rate limits of about 36%. The experiences of consumers in payday?free states show that eliminating the payday debt trap brings a host of positive benefits.
This report draws on years of research (including academic studies, surveys and focus group results) to outline and articulate the evidence from payday ?free states. The experiences of these states demonstrate:
- State payday loan bans save consumers more than $2.2 billion annually in fees that would otherwise be paid to payday lenders.
- Payday loan restrictions do not force consumers to use products that cause greater harm than payday loans. Borrowers in states without payday loans employ a variety of strategies to address a cash flow shortfall at a fraction of the cost of payday loans.
- In addition to protecting consumers from the high costs of payday loans, state payday lending restrictions also help borrowers by preventing the long?term harms associated with these loans. These harms include: increased difficulty paying bills, delayed medical spending, involuntary bank account closure, higher likelihood of filing for bankruptcy, and decreased job performance.
- Finally, there is broad public support for maintaining the rate caps in states that prevent the harms of the typical 400% payday loan, both from citizens at large and from former payday borrowers.”
The report (“Shark-Free Waters: States are Better Off without Payday Lending”) goes on to point out that North Carolina consumers avoid more than $457 million per year in fees as a result of the state’s pro-consumer bans on payday and “car title” lending. Let’s hope that, whatever the results of this November’s election, state leaders read and absorb this report and stick to their guns in resisting the payday sharks in 2017 and beyond.