New report: Big banks bankroll Iowa payday lenders
A new report released today by Iowa CCI national ally National People’s Action has some alarming statistics for Iowa.
The report shows that:
capping payday loan interest rates at 36 percent would save Iowans over $36 million every year. (That's $36 MILLION that is being stripped away from our local economy!)
there are 220 payday lenders in Iowa. (There are more payday lending shops than there are McDonald's in Iowa!)
nearly half of all licensed payday lenders in Iowa have been financed by big banks. Wells Fargo and Bank of America are the top financiers of payday lending across the country.
Payday loans, widely available in 32 states, online, and increasingly by banks as well, are short-term small dollar loans averaging less than $400 but charging annualized interest rates of 400% or more. Efforts to cap the rates on these loans have stalled in the Iowa legislature for the past several years.
“If you want to talk about creating jobs in Iowa, let’s talk about putting more cash in the hands of consumers,” said CCI member Judy Lonning from Des Moines,
“Let’s talk about lifting people of out of poverty instead of profiting off their crises.”
Major findings of “Profiting from Poverty”:
Record payday loan revenue: Nationwide, revenues for the major payday loan companies (Advance America, EZ Corp, First Cash Financial, Dollar Financial, Cash America, QC Holdings) have risen to their highest level - $1.48 Billion per year- more than before the financial crisis. Revenue from payday lending for the six largest payday lenders nationwide has increased a net 2.6% over the last four years (2007 to 2010).
Consumers pay billions in fees: Low and moderate-income borrowers pay minimum of $3.5 Billion in fees annually to payday lenders charging triple digit interest rates on small cash loans. The nation’s biggest banks fund a major segment of the payday lending industry that collects more than $1.5 Billion in fees from payday lending.
Stopping excessive interest rates can put money into our local economies: If payday loans charged only 36% in interest rates, instead of an average of 400%, payday loan borrowers could save over $3.1 billion annually.
The Bottom Line:
Because of the economic crisis we are facing, affordable solutions for people who seek and need these types of loans are necessary. Iowa CCI members call on the Iowa Senate Commerce Committee to pass SF 388, a bill designed to cap interest rates at 36%.