CALIFORNIA SENIORS ARE LARGEST GROUP OF BORROWERS CAUGHT IN DEBT TRAP
Sacramento, California-July 7, 2017— Yesterday, the California Department of Business Oversight released a
new report about payday lending in California which shows that seniors are now the largest group of payday
loan borrowers in California, taking out just under 2.7 million loans in 2016, a nearly three-fold increase from
“This should be a wakeup call to the California legislature,” explains Liana Molina, director of Community
Engagement at the California Reinvestment Coalition, which has advocated for stronger consumer
protections against these loans. “We would like to know what’s behind this big increase in senior borrowing. Are
lenders targeting their risky products to people who are on fixed incomes? What sort of payment plans are
companies offering to seniors when they get caught in the payday loan debt trap of cyclical borrowing, as many
of them inevitably will? And, will the California legislature finally stand up for consumers instead of protecting
an industry whose profits are so clearly “earned” by causing financial harm, including to its newest target
audience: Grandma and Grandpa?”
The report includes some positive news, including an overall reduction in the number of loans originated and
fewer payday loan storefronts from the year before.
However, other data points are troubling to consumer advocates:
1) Average APR increased: The average APR charged last year was a whopping 372%, an increase from the
average of 366% charged in 2015.
2) 75% of profits were derived from borrowers caught in the “debt trap”: According to the DBO, 74.8%
($343 million) of the $458.5 million in fees collected on payday loans came from borrowers who took out seven
or more loans. The number of people who took out 5 or more loans (899,285) far outnumbered the number who
took out just one loan (403,441). Of subsequent transactions by the same borrower, the DBO report indicates
that 63% were made on the same day the previous loan was “paid off.” The structure of payday loans, with high
APRs and short repayment periods (two weeks) causes the majority of borrowers to take out new loans right
after paying off their previous loan, which has been dubbed the “payday loan debt trap” by consumer advocates.
3) Bad Debt Skyrockets: There was a 54% increase in “charged off” (uncollectible) debt by lenders, totaling
nearly $143.4 million, raising advocate concerns about lenders offering products they know are unaffordable.