Idaho notes a 34 percent decrease in statewide payday lending

Inside Subprime: April 10, 2018

By Lindsay Frankel

In recent years, Idaho has seen a decline in the number of payday lenders operating in the state. In 2015, 69 storefronts closed, many of which were owned by national chains. Texas-based EZCorp Inc. was responsible for 20 of the store closings, and also closed all 480 of its U.S. stores, noting an “increasingly challenging legislative and regulatory environment” as one of its reasons for going out of business.

In a report conducted by the PEW Charitable Trusts in 2012, Idaho payday lenders were found to charge the highest interest rates in the nation, with a whopping annual average interest rate of 582 percent. The report notes that there are no payday lending stores in states that either prohibit payday lending or cap interest rates at 36 percent. This indicates that payday lending services are more likely to flourish in states that do not closely regulate payday loans. Conversely, the decrease in payday lenders in Idaho is likely attributed to the discussion of new payday lending regulations.

A 2014 bill limited payday loans in Idaho to 25 percent of the borrower’s monthly income and also placed limits on additional fees. This change was backed by the industry and unlikely to be the direct cause of the steep drop in payday lending licenses. Still, it is possible that this bill has drawn attention to disreputable practices in the industry and created a climate of change that has encouraged payday lenders to preemptively close down shop in Idaho.

Around 50 percent of all payday loans are given to borrowers at least ten times in a row, a 2014 CFPB study found. One likely conclusion is that the payday lending business model depends on borrowers getting stuck in a cycle of debt, according to former CFPB Director Richard Cordray.

Before Cordray’s controversial departure from the CFPB late last year, the CFPB was actively working to place limits on payday loans. We we’ve reported many times, the Bureau introduced rules in late 2017 which were designed to protect consumers by forcing lenders to verify potential borrowers had the means to pay back their loans. However, recent turmoil in the CFPB may mean these rules might never go into effect.

But until we know for sure what’s happening with these payday lending rules, are payday lenders in Boise and other communities closing down their stores in anticipation of these future regulations? Since payday lenders in Idaho declined to comment on the topic, we can only guess that newly proposed laws may be impacting the decline. Utah, which has comparable laws to Idaho, also noted a decline in payday lenders, though the drop was not as significant. Paul Cline of the Utah Department of Financial Institutions suggested that payday lenders in Utah are likely aware that limits on lending will become more restrictive in the future.

Even as stricter regulations are put in place, there is still a high demand for payday loans nationally. As many as 76 percent of Americans are living paycheck to paycheck, and about 20 percent of households don’t have access to traditional banking services. This indicates a need for no credit check loans in Idaho and other states. Many individuals see payday loans as their only option when financial emergencies arise. Still, predatory lending practices need to be closely regulated to ensure individuals don’t get trapped in a cycle of debt. It remains to be seen whether payday lenders can stay in business as the CFPB works to put limits on payday loans.

To learn more about payday lending in Idaho, check out these related pages and articles from OppLoans:

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