Payday loans drop 39% during pandemic
California payday lenders have seen a huge drop in loan numbers and dollar volume during last year’s pandemic, possibly due to stimulus funds that have been allocated to short-lived consumers. money, according to a report released on July 22.
The state’s Department of Financial Protection and Innovation analyzed 150 payday lenders, which offer hardship loans at higher interest rates than traditional lenders.
The report shows that the amount of payday loans fell to nearly $ 1.7 billion in 2020, down 39% from $ 2.8 billion in 2019.
For comparison, the 2020 payday loan volume in the state was down 49% from $ 3.3. billion dollars in 2011, as the country was just emerging from another deep recession.
“It is possible that the stimulus and UI may have helped close the gap for many consumers in 2020,” said Christopher Shultz, acting commissioner of the California Department of Financial Protection and Innovation, in a statement. interview.
The drop in payday lending activity may also have been the result of a halt in utility collections, as well as home rental and mortgage forbearance programs run by the state and federal governments, a Shultz said.
“There are concerns on the horizon with federal mortgage abstentions and some rent relief. People haven’t paid their mortgages or rent for part of 2020 and 2021, but those bills can come due at some point and that’s a concern we’re following closely, ”he said. .
The California Housing Finance Agency is offering mortgage forbearance to qualified homeowners as a way to ease financial hardship associated with the coronavirus pandemic.
The state also plans to pay 100% of the unpaid rent that low-income Californians incurred during the pandemic.
Shultz also noted that some payday lenders may reduce their presence in California due to a new state law that caps payday loan interest rates charged to borrowers at 36%.
“It is possible that some lenders have started restricting their operations in California or making fewer loans due to the cap,” Shultz said. mentionned.
There has been a decline in the number of approved payday lending establishments. According to the report, from 2019 to 2020, the number fell to 430, or 27.7%.
The report also found that 61.8% of payday clients received government assistance, while 49% of payday loan clients had an average annual income of $ 30,000 or less, and 30% had an average annual income of $ 20,000 or less.
The number of payday loans fell to 6.1 million in 2020 from 10.2 million in 2019, while the total number of retail customers who obtained payday loans fell to 1.1 million from 1.6 million in the same period.
For reprint and license requests for this article, CLICK HERE.