Report shows Payday Lending Law is helping keep people out of debt
KENNEWICK, Wash. -- A new report by the Department of Financial Institutions shows the Payday Lending Law which went into affect January 1, 2001 has made major differences for consumers in Washington.
Since going into affect Washington consumers paid $122 million dollars less in fees than they did in 2009. It also shows that in Washington, payday lending locations decreased by one third.
Last January, the payday lending industry in Washington was slapped with several restrictions. One, no one can take out more than eight pay day loans a year. This information is now shared via computer, so people can't go from one place to another trying to get more than eight advances per year.
The Director of Statewide Poverty Action Network, Marcy Bowers says, if you turn the fees and interest rates on these loans into an annual fee, it averages into a 391% APR. She says that is something people borrowing money in the first place likely can't afford.
"They don't have enough income necessarily two weeks later to pay off the loan plus the fees,so often what we see people doing is taking out a loan with a different lender to help them pay back the first loan," says Bowers.
Advocates say the law seems to have capped the vicious cycle.