Louisiana Budget Project Director Jan Moller issued the following statement in response to the Louisiana Legislative Auditor’s report on payday lenders:
“The auditor’s report confirms what the payday industry tried to deny – that these short-term loans are designed to trap workers in long-term cycles of debt. And it shows there are no consequences for lenders that flout state regulations. This should serve as a wake-up call to state policymakers that it’s time to rein in this predatory industry.”
The Louisiana Legislative Auditor found that the Louisiana Office of Financial Institutions (OFI) does not effectively regulate the payday industry. According to the report:
– State regulators cannot detect whether payday lenders violate state law by letting borrowers “roll over” their loans without paying down 25 percent of the balance. The auditor identified 318,489 instances in 2013 where borrowers closed and opened a loan on the same day, at the same location and the same amount.
– There are no consequences for payday lenders that break the law. State regulators identified 8,082 “major” violations over a 42-month period where payday customers were overcharged, but OFI failed to issue any penalties. The agency also failed to follow up on 6,612 (62 percent) of the major violations, so there’s no way of knowing if most overcharged borrowers received a refund.
– Customers have little recourse when they are abused by payday lenders. OFI does not have procedures to address verbal complaints, and failed to follow-up on 46 percent of borrower complaints received from Jan 1, 2010 through June 30, 2013.
“This report shows the need for real reform,” said David Gray, who coordinates LBP’s Poverty to Opportunity Project. “Payday lenders made $146 million last year from vulnerable borrowers in Louisiana – money that could otherwise have been used to pay bills, buy groceries or provide for other basic needs. It’s past time the Legislature stood up to these predatory practices and protected Louisiana consumers.”