Payday Lending and Economic Stability

7/29/2019 Payday Lending and Economic Stability

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25thAnniversary United MethodistWomens Legislative Event

Economic Mobility, Consumer Financial Protection,and

New Local Data Platforms for Texas

January 28, 2013Don Baylor, Jr.

[email protected]

OpportunityTexas
mailto:[email protected]:[email protected]


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Working for a Better Texas

2

Improving public policies to better the economic and socialconditions of low- and moderate-income Texans.

Creating economic opportunity to strengthenfamilies and grow the middle class;

Increasing access to quality, affordable healthinsurance;

Helping families meet basic needs; Enhancing child well-being and child

protection; Ensuring effective public administration; and Securing fair and adequate taxation to pay for

critical public investments in Texas.


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Opportunity TexasAchievements Expanding Access

to Good Jobs Improving College

Access The Cost of College Ready, Steady, Go!

The State ofWorking Texas

Increasing Income VITA Site Toolkit

Payday Lending

Promoting Savings Tax-Time Savings

Project

Smarter Texas &Smarter TexansSave

Child Support forCollege

Asset Building TROI

Dollar for Dollar


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Changes in HomeownershipRates

5

Source: Current Population Survey

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

U.S. total Non-HispanicWhite

Black Hispanic or Latino

Percenta

gePoints

1994-PeakPeak-2011


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Household Net Worth6

0

100

200

300

400

500

600

700

1989 1992 1995 1998 2001 2004 2007 2010

Thousands

of2010

dollars

Year

Median Mean 25th Percentile

Source: Federal Reserve Board, Survey of Consumer Finances

-15%

-39%

-44%

Change:200710


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Impact of the Great Recession

Asset Building Shifts Focus Home ownership becomes less

important Liquid assets (savings) become

new focus Value of a College Education Large student loan debt burden leads to questions

about college financing and valuation Cost of college shifts onto students and their families College savings become increasingly important

Role of Philanthropy Changes Fewer Jobs, More Un/Underemployed, Lower Pay


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Economic Mobility Framework

Intergenerational Strategies Family focused policies that simultaneously benefit parents

and their children Programs that keep families from churning in and out of

poverty

Cross-system Strategies Service delivery integration and coordination Systemic understandings of structural and individual

causes of relative and absolute need

Education and Savings as Engines Skills development Career- and college-readiness Liquid asset building Income and in-kind supports as supplements


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CFED Assets & OpportunityScorecard: Where Texas Lags:

9

Outcome Measure Rank

Liquid Asset Poverty 33rd

Unbanked/Underbanked 47th /48th

Subprime Consumers 49th

Low-Wage Jobs 41st

High-Cost Mortgage Loans 47th

Uninsured Rate 51st

High School Degrees 51st

&


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Solutions-Oriented Data

Poverty Rate

Presents a broadpicture of a socialproblem

Does not imply anysort of action

Measures a complexproblem without acausal mechanism

2-yr College CompletionRate for Full-Time

Students Provides a glimpse into a

local service

Implies a policy action forimprovement

Measures a single aspect

of opportunity upon whichcommunity basedorganizations and localgovernments can act.

Not Solutions Oriented Solutions Oriented


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The TROI: Levels of Analysis

The TROI compares economic mobilityindicators across regions in Texas:

Counties (254)

State Agency Jurisdictions (6)

Education Service Centers (TEA) Higher Education Regions (THECB)

Tax & Economic Activity Regions (Compt.)

Councils of Government (COG) Regions

Workforce Board Areas (TWC)

HHS Regions (HHSC)

County Population/MSA Tiers (4) Major Metro (500,000+): 7 counties

Mid-size Metro (


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Pulling it Together12

EconomicOpportunity

Protect

Learn

EarnSave

Invest

Adapted from CFED Household Security Framework

K-12 Education

Post-secondaryEducation andSkills

Development

EconomicDevelopment and

JobsFamily Budgets

Savings and Assets

Credit and Debt

Health Nutrition


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Regional Opportunity in thePanhandle


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Create an Opportunity Snapshot:

o By Countyo By Region

Select Indicators

Select Comparison Points

Texas Regional Opportunity IndexOpportunity Snapshot Generator

16 - Amarillo

Higher EdComptrollerEconomic

COGEducation

Service

Education Service Center Region Snapshot:Choose by Location or Name

ESC Region


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$ Savings & Assets

Dallas Metro Ft. Worth Metro StateFinancial Institution Density (per

10,000 people) 3.2 3.0 2.9Foreclosure Rate 3.3% 3.5% 3.6%New Prepaid College Savers (per

1,000 eligible kids) 0.7 0.4 0.5Total Prepaid College Savers (per

1,000 eligible kids) 5.5 3.8 3.9Subprime Mortgage Rate 6.5% 7.2% 9.1%VITA Tax-Time Savings Rate 0.7% 2.7% 1.7%


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2013: TROI Online PlatformLaunches


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n s ng e ea : an eLegislature Break the Cycle of

Debt?


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How the loophole works

CSO or Payday

Lender

Third PartyLender

Borrower

$67.62

$300.00$1.14

Who gets the money out of$361.06

The CSO Act sets no limit on ratesand fees.


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Last Session

HB 2592 provides for notice and disclosures for

consumers to enable consumers to makemore informed choices

HB 2594 Licensing, oversight, examination and

enforcement authority to the OCCC

requires quarterly reporting and annual report

to OCCC of important data enforcement of fair debt collections practices

as well as federal military lending laws


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Net Effect

Incorporated nearly identical licensing andregulatory structure of Texas Finance CodeChapter 342 into the CSO Act Chapter 393

Did not incorporate rate and fee structure

Lenders retain ability to operate 3-partymodel

Borrower experience changed very little

Local ordinance reaction


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Quick Overview Of Statewide Data

Datapoint Actual (through3Q)

2012 Projection Comment

New Loans 2.6 Million 3.3 Million About 500,000consumers perquarter

Refinances 2.5 Million 3.2 Million

Avg. CAB Fee(SPP)

$23 $23 TX=HIGHESTCOST

Avg. No. of

Rollovers (SPP)

2.4 (per quarter) 6-10 Many consumers

rollover 4x inquarter

Auto Repos 25,136 31,420 About 92 per day

Principal Loan

Amount

$2.0 Billion $2.5 Billion


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Local Data Highlights

Worst MSAs Worst MSA 2nd Worst MSA 3rd WorstMSA

State Avg.

On-Time

RepaymentRate (SPP)

Beaumont-

Port Arthur(10%)

Houston-

Sugarland-Baytown(19.6%)

Fort

Worth-Arlington(19.8%)

29.6%

Avg. CABFees(SPP per$100)

Dallas-Plano-Irving($24.66)

Laredo ($23.26) El Paso($23.07)

$22.92

Auto RepoRate

Amarillo(5.65%)

Killeen-Temple-Fort Hood(5.31%)

Waco(5.23%)

3.06%

o cy mp ca ons o a a


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o cy mp ca ons o a afor

83rd LegislatureGoal: Increase On-Time Repayment Rate

(Success)

Address Ability to Repay (Loan Amounts/Income)

Lengthen Minimum Term

Goal: Decrease Debt Burden Rate

End unlimited rollovers for single-payment

products Reduce CAB fees for installment products


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Better Texas Family Budgets

#BetterTe

Define good jobs

Demonstrate the budget impact of individual

expenses Shows savings in context of family budget

Contain all of the pieces of basic economic

security; data platform for understandingimpact of high-cost payday (CAB) lending to

budgets

Show importance of the safety net


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Defining Issues for Payday & AutoTitle (CAB) Lending Reform

Number of Refinances

Lack of CAB fee control

Loan Limits (Amounts)

High-Cost Installment Products

Real-Time Enforcement (Database)

Extended Payment Plans (Opt-out)


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FAMILY BUDGETS

Find out more at www.cppp.org

www.facebook.com/bettertexaswww.twitter.com/CPPP_TX

Brought to you by:


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Post-secondary Education & SkillsDevelopment

Enact a statewide effort to reduce student loandebt and dependence (THECB master plan)

Ensure FAFSA completion is supported and

incentivized Ensure adult education/ESL students have more

seamless pathway into postsecondary credential Ensure GED changes do not pose barriers for

Texas students Ensure financial aid reaches more Texas students

with adequate grants Improve (pre- and post) student loan counseling

requirements

#BetterTe


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Savings & Assets/Credit & Debt

Enact rollover and fee limits on payday and auto title loans

Reform or remove asset limits for SNAP, TANF

Pursue statewide certification for financial coaches

Increase contributors (and contributions) to the Texas FinancialEducation Endowment; pursue necessary TFEE tweaks

Enable qualified/certified financial coaches toassist clients with completing 529 applications

Identify source of funding for Texas Save & Match (unclaimed

prop.)

Ensure public pension systems provide adequate retirementbenefits to current and former employees

Establish Measures for Financial Stability & Economic Mobility

Continue to monitor increase in property tax lending #BetterTe


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Health & Nutrition

Pursue the federal option to expand Medicaid for

adults up to 133% FPL;

Protect CHIP and Medicaid from policy changes

and/or budget cuts that undermine health careaccess;

Increase access to SNAP

Remove enrollment barriers (e.g. asset limits)

Increase access to free school breakfast(universal) and free summer meals.

Continue to improve eligibility system performance

and administration #BetterTe


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Learn something new orinteresting?

Share it on Twitter!

@CPPP_TX#BetterTexas


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For the most recent information or to sign up for

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CPPP

Center for Public Policy Priorities

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Austin, TX 78752

P (512) 320-0222 F (512) 320-0227
http://www.cppp.org/http://www.cppp.org/

Payday Lending and Economic Stability

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