> Payday loan usage rate: 10%
> Number of payday lending storefronts: 2,059
> Pct. below poverty line: 18.7%
> Median income: $42,505
Louisiana laws allow lenders to charge up to 567% annual percentage rate (APR) for a two-week $100 payday loan, according to the Center for Responsible Lending. Tim Mathis, policy analyst for the Louisiana Budget Project, explained to 24/7 Wall St. that payday lending undermines many otherwise successful antipoverty programs in Louisiana because most borrowers do not understand the true cost of their loans and use the loans for recurring expenses rather than one-time uses. Among all states for which payday loan data was available, Louisiana had the third-highest percentage of families living below the poverty line, at 18.7%, and of households earning less than $35,000 a year, at 33.3%.
> Payday loan usage rate: 10%
> Number of payday lending storefronts: n/a
> Pct. below poverty line: 15.8%
> Median income: $45,090
In 2008, the state cut the maximum interest rate payday lenders can charge from 391% to 28%. Despite the law, payday lenders found loopholes, and in 2009 the New York Times reported that lenders were charging interest and fees that together amounted to 680% APR. While the Ohio House passed a bill seeking to close loopholes left open by the 2008 law, the bipartisan effort never made it through the Senate. The courts have now taken up the issue. Last year, an Ohio state judge ruled that a second-mortgage lender using a similar fee structure as payday lenders to charge an effective 235% APR had violated the 2008 law that placed a 28% cap on payday loans.
> Payday loan usage rate: 11%
> Number of payday lending storefronts: 729
> Pct. below poverty line: 13.4%
> Median income: $55,631
Washington is tied with Missouri for the second-highest payday loan usage rate, and it is the only state on our list with “hybrid” regulation. Pew classifies Washington as hybrid because borrowers in the state cannot take out more than eight payday loans per year — a form of protection for consumers. WashPIRG, the Washington state Public Interest and Research Group, calls for restricting or regulating payday loans and other short-term small payment loans — when APRs can reach as high as 391% for a two-week $100 loan in the state. According to the Statewide Poverty Action Network, since enacting a law to protect Washington consumers from excessive payday loan charges in 2010, borrowers have saved more than $122 million in fees.
> Payday loan usage rate:11%
> Number of payday lending storefronts: 1,275
> Pct. below poverty line: 15.3%
> Median income: $44,301
The state of Missouri prohibits payday loans above $500 and requires loans to have a minimum term of 14 days and a maximum of 31 days. The state also prohibits lenders from charging a total of more than 75% of the principle in interest and fees on any loan. However, these policies do not protect Missourians who take out payday loans, which can legally be accompanied by an APR as high as 1,955% for a two-week $100 loan, according to the Center for Responsible Lending. Much of the industry’s profits in Missouri, 90% according to Communities Creating Opportunities (CCO), are derived from borrowers who are consistently paying off past debts to avoid default. According to Molly Fleming-Pierre, Policy Director at CCO, after Joplin, Mo., was ravaged by a tornado, payday lenders were among the fastest to arrive at the scene.
> Payday loan usage rate: 13%
> Number of payday lending storefronts: 409
> Pct. below poverty line: 16.9%
> Median income: $42,072
Oklahoma has the highest percentage of residents who have used payday loans in the past five years, according to the Pew Study. Kate Richey, a policy analyst at the Oklahoma Policy Institute, says there are more payday lending storefronts in Oklahoma than the “number of Walmarts, McDonalds, and Quicktrips combined.” In the state, a lender is prohibited from issuing a loan to a borrower with more than two outstanding payday loans. In an interview with 24/7 Wall St., Richey explained that these regulations were intended to protect low- and middle-income households that are targeted by payday lenders who rely on “loan churning” for business as they encourage consumers to take out loans for each of their paychecks.
Michael B. Sauter, Alexander E. M. Hess and Lisa Nelson