Indiana is one of many states in the U.S. debating the payday loan industry. Some officials are in favor of reining in the industry through new rules and regulations, while others say it’ll hurt poor consumers. Perhaps to come to a conclusion facts need to be outlined to all interested parties.
A new fact sheet was released Thursday that tends to highlight what’s exactly wrong with payday loans. Moreover, the fact sheet creators argue that online personal loans in Indiana have become predatory in nature. This needs to stop, organizers say, and this fact sheet may help in the crusade.
The U.S. Public Interest Research Group (PIRG), Indiana Catholic Conference, and Indiana Institute for Working Families (IIWF), a co-lead for the Indiana Assets & Opportunity Network, released new data that they say proves the “payday lending business is predatory by design.”
One of the key findings presented by the groups is the fact that the average Indiana payday borrower pays more in finance charges and fees than the actual principal amount. It used the example of how a typical payday loan borrower will pay about $400 more in finance charges than the $317 loan.
The other key finding is that payday lending caused the net loss of around $16 million in economic activity across the state. It’s even believed that 241 jobs have been lost because of payday loans – the report didn’t exactly show how payday loans were the cause of job losses.
They argue that a payday loan payment accounts for more than one-third of the average borrower’s paycheck, which means they can’t pay for their essentials, like food and rent.
“The seemingly quick-fix solutions become costly traps, forcing Hoosiers to borrow again just to make ends meet,” said Jessica Fraser, program manager at IIWF and a co-lead for the Indiana Assets & Opportunity Network, in a statement. “This cycle is built to ensure payday lenders have reliable revenue and repeat customers while sinking those with already limited resources further and further in debt.”
Fraser adds that the amount of data available shows how payday loans are the “most predatory forms of credit on the market.” Although these financial alternative products are marketed as coming with “reasonable” fees and charges, the average interest rate charged in the state of Indiana is more than 300 percent.
“The success of the payday lending industry is built on borrowers’ inability to repay – and the industry preys on people with low incomes and communities of color,” the report states. “Payday lending practices that create a debt trap take a considerable toll on the lives of Indiana’s residents and the economy of the state as a whole.”
In the end, according to the groups, the only people who benefit from the payday loan industry are out-of-state payday lenders, Governor Mike Pence, Attorney General Greg Zoeller, State Senator Travis Holdman and State Representative Woody Burton. All of the names list above have received campaign contributions from the payday loan industry.
Public officials from Indiana have not commented on the report.