The volume of payday lending in the state and number of lenders has declined over the past two years after spiking in 2011, according to data released by the Oklahoma Department of Consumer Credit.
Oklahomans took out 803,675 deferred deposit loans in 2013 totaling more than $383.9 million, compared to 975,970 payday loans that added up to $399.1 million in 2012.
The number of payday lenders in the state also are in decline — from 356 in 2010 to 290 in 2013, the data shows.
A decrease in storefront locations for payday lenders is part of a national trend in the industry, said Diane Standaert, an attorney for the national nonprofit group Center for Responsible Lending, which has done several studies tracking the payday lending industry.
“The shrinking storefronts and decline of loan volume in Oklahoma is consistent with what we’ve seen in other states,” Standaert said.
Company revenue stable
However, with a shrinking number of lenders and loans in the state, payday lenders made $53 million in finance charges in Oklahoma in 2013 compared to $54 million in 2012, down just 1 percent. The number of payday loans Oklahomans took out decreased by 17 percent from 2012 to 2013, while the dollar amount of loans declined by just 3 percent.
“Payday lenders have sought to make up for a lack of growth by either making larger loans or charging more fees to try and squeeze more out of financially stressed consumers,” Standaert said. “They are draining $50 million in fees and finance charges every year despite the fact there are a fewer number of consumers and a fewer number of loans.”
It’s not likely that Oklahoma’s strong economy and low unemployment rate has caused a taper in payday lending in state, said Nathan Groff, chief government relations officer for Florida-based Veritec Solutions LLC. Veritec maintains Oklahoma’s payday lending database, which tracks payday loan transactions in the state.
“It really is counter-intuitive, but a high unemployment rate does not help payday lending,” Groff said.
That’s because deferred deposit loan users borrow against future earnings, and loans are typically due on the borrower’s next payday, Groff said.
Most lenders require users to verify employment before taking out a loan, he said.
“When employment rates go down, loan volume tapers off,” Groff said. “It’s not somebody who is on government assistance who is using these loans, that’s not the reality of it.”
Loans peaked in 2011
Payday lending in Oklahoma spiked in 2011 to 1,013,076 loans, a 4 percent increase in loan volume over 963,896 loans in 2010.
Oklahoma borrowers took out $401.8 million in payday loans in 2011 versus $383.4 million in 2010.
More Oklahomans could have turned to payday lending after their financial resources and credit scores suffered during the last recession, said Steven Shepelwich, senior community development adviser at the Federal Reserve Bank of Kansas City. Shepelwich has studied some of the reasons consumers turn to high-interest deferred deposit loans and other options instead of traditional bank loans.
“These are maybe people with credit blemishes coming out of the recession, people who have tapped into their resources and get their credit dinged,” Shepelwich said. “Payday borrowers by definition have a bank account and have a job, but are still struggling to make ends meet at different times.”
Cristy Cash, vice-president for the Bethany-based nonprofit Consumer Credit Counseling Services of Central Oklahoma said about 25 percent of the people with financial problems she sees for credit counseling services use payday loans as a way to survive from paycheck to paycheck.
Many payday borrowers she counsels are operating in “crisis mode,” and turn to payday loans as a last resort after they have exhausted all other options, she said.
“I am seeing people who basically have systemic financial problems — this isn’t the beginning of their problems when they turn to high-interest loans, it’s been a progression to increasingly higher interest, less traditional lending options,” Cash said. “What it looks like to me is a deterioration of their finances and of them being able to cope.”
What are deferred desposit loans?
Deferred deposit loans, or payday loans are small, short-term loans that are usually repaid on a borrowers next payday. The loans typically carry high interest rates.
In Oklahoma, deferred deposit loans are capped at $500 per loan transaction and the terms of loans are limited to between 12 and 45 days. Oklahoma payday lenders also may not charge borrowers more $15 per every $100 up to the first $300 of a loan, and $10 per $100 thereafter in finance charges. Those finance charges translate into annual percentage rates between 405% to 341% depending on the amount borrowed.
State law also requires payday lenders to offer borrowers an installment repayment plan after debtors enter into a third consecutive loan.