Washington state's 2008 payday lending statistics show a downturn in the number of payday loan companies, but an increase in the use of their services over the past two years.
The Washington State Department of Financial Institutions has released the 2008 Payday Lending Report online: http://www.dfi.wa.gov/cs/pdf/2008-payday-lending-report.pdf.
The 2008 figures -- submitted by 34 companies making up 90 percent of the state's loans measured in dollar value -- show an increase in both the number of loans and the amount of money loaned.
The number of loans made to military personnel dropped, however. On Oct. 1, 2007, a 36 percent annual percentage rate cap took effect for all loans made to military borrowers. The Talent-Nelson Amendment of the John Warner National Defense Authorization Act of 2007 mandated the cap. Due to this cap, the majority of the payday lenders in Washington State have ceased lending to military borrowers.
The number of military borrowers has decreased 92 percent, from 11,650 in 2006, to 868 in 2008.
If you use payday loans, you should be aware that the Washington State Legislature passed two new payday lending laws this year – one of which will have significant impact on how you use payday loans. DFI wants you to know how these changes may impact your financial life.
Some of the biggest changes stem from ESHB 1709, Chapter 510 Laws of 2009 that will go into effect Jan. 1, 2010:
-- Limits the total loan(s) amount to $700 or 30 percent of the borrower's gross monthly income, whichever is less.
-- Limits the number of loans a borrower can take to eight in a 12-month period.
-- Creates a single database for all payday loan companies to enter borrower data, thereby preventing lenders from making larger loans or more loans than is legally allowed.
-- Replaces the previous payment plan with an installment plan for borrowers who can not pay back their loan as agreed. The installment plan is available at the borrower's request at any time before their loan is due. The installment plan provides a longer payback time with no additional fees.
-- New loans may not be made to borrowers in default or in an installment plan on existing loans.
"It is our hope that this law will help DFI protect consumers while making sure access to these short-term loans continue for those who may not have borrowing alternatives," Scott Jarvis, director of DFI said.
The other law, SB 5164, Chapter 13 Laws of 2009, became effective July 26, 2009. In the past, when a payday loan company collected its own debts it was not subject to Washington's collection agency practices act which has many protections for consumers. This law protects consumers from harassing or intimidating behavior when payday loan companies collect their own debts.
Before taking a payday loan DFI urges consumers to verify the licensing status of any payday lender they're considering taking a loan from. (Go to www.dfi.wa.gov and click on "verify a license" to enter the payday lender information into the database query form.) All payday lenders offering services to Washington residents — including Internet payday lenders — are required by state law to be licensed by DFI before doing business in our state. Some online payday lenders offer services that are not legal in Washington State.
Make sure you have the information you need to make sound decisions for your financial future. DFI offers information and assistance for consumers and our licensees in a variety of ways – listservs, Web sites, Twitter, LinkedIn, YouTube and more.
Call the agency toll-free at 1-877-RING-DFI.