Are Florida Payday Loans Still Dangerous in 2019?
By Lindsay Frankel
Payday loans in Florida drain more than $311 million from Florida residents each year, according to the Center for Responsible Lending. And while other states have moved to cap the high interest rates that lead consumers into a debt trap, Florida lawmakers have requested to block measures taken by the Consumer Financial Protection Bureau to curb predatory lending. This is particularly concerning because payday loan use among the elderly is growing in Florida, and seniors on a fixed income are especially vulnerable to the financial impact of these risky loans.
A payday loan is a short-term loan designed to be repaid out of the borrower’s next paycheck. Payday loans don’t typically require a credit check, which makes these loans appealing to people with bad credit. But the average annual interest rate on a payday loan in Florida is 304 percent, and most borrowers can’t afford to keep up with their daily expenses while covering the fees. While the product is marketed as a lifeline for people who incur unexpected expenses, these dangerous loans only exacerbate financial fragility.
Florida does have laws in place to protect borrowers, including a requirement that prevents borrowers from taking out more than one payday loan at a time. But this has failed to curb Floridians’ repeat borrowing behavior; in 2015, more than 83 percent of Florida payday loans were issued to borrowers who took out seven or more payday loans in a year.
Consumer advocates say payday loan firms prey on the elderly and minorities, and that’s certainly the case in Florida. Payday loan businesses concentrate their storefronts in high-minority neighborhoods; communities with 50 percent or more black and Latino families have 8.1 payday loan stores for every 100,000 people, as opposed to just 4 stores in predominantly white communities. There are also more storefronts located in low-income areas.
The number of seniors using payday loans in Florida is concerning as well. The percentage of elderly payday loan borrowers more than doubled over the course of a decade, despite population growth of only 9.7 percent. And seniors relying on a fixed income become even more financially unstable when adding payday loan fees to their budget.
An Obama-era federal rule governing payday loans would have required that lenders verify a borrower’s ability to repay before issuing a loan. But members of Congress in Florida have repeatedly deemed the rule unnecessary, claiming that Florida state laws governing payday loans are “among the most progressive and effective in the nation.” And now, the CFPB has announced plans to rescind this portion of the rule.