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In states that have eliminated payday loans, consumers have been left with more costly short-term credit options and greater financial stress.
Research from Georgia, North Carolina and Oregon, where payday loans have been eliminated, shows bans have led to a rise in bankruptcy filings, bounced checks, late fees, disconnected utilities and complaints of harassment by bill collectors.
- Since payday loans have been eliminated in Georgia and North Carolina, consumers in those states have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 (“no asset”) bankruptcy at a higher rate.
- In Atlanta, the Federal Reserve check processing center returned 1.2 million more checks per year after the ban. At $30 per item, depositors paid an extra $36 million per year in bounced check fees after the ban.
- In states where payday advances have been banned, households pay an average of $200 more in overdraft protection and bounced check fees than in states where payday advances are available.
- After payday advances were banned in North Carolina, total complaints against lenders and debt collectors rose by over a third when compared to other states.
- Following the elimination of payday advances in Oregon, former payday borrowers turned to checking account overdrafts of various types and/or late bill payment. The study found that restricting access to payday loans “caused deterioration in the overall financial condition of Oregon households.”
- After payday loans were eliminated in North Carolina, the most common option was to pay the expense late or not to pay:
- Ten percent of those who did not pay or paid late had utilities disconnected, went without a prescription medication, or had a damaged credit rating.
- Fifty percent of those who did not pay or paid late incurred late fees on charges, including some who said their bill was turned over to a collection agency or that they faced repossession or bankruptcy.
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