INDIANAPOLIS — A new report released Wednesday shows payday lenders have had a $300 million impact on Hoosier households over the past five years.
Released by the Indiana Institute for Working Families and the Indiana Assets and Opportunity Network, the report shows 86 percent of the state's 262 payday loan storefronts are operated by out-of-state companies. The report also shows the payday lenders are disproportionately located in low-income neighborhoods and communities of color.
"This report confirms what we've anecdotally known about the payday industry for years. It drains resources from families who need it most — especially in targeted low-income areas and communities of color," Jessica Love, executive director of Prosperity Indiana, said. "These struggling families' limited resources would be better served paying for critical basic needs and supporting local businesses."
The report highlights that the typical payday loan borrower has a median income of just over $19,000 a year and has to reborrow eight to 10 times, pay more in fee than the amount originally borrowed.
The group's said the payday industry's growth across the state can be attributed to a 2002 decision by the Indiana General Assembly to grant payday lenders an exemption to Indiana's interest rate cap of 36 percent and criminal loansharking limit of 72 percent APR.
"Granting payday lenders a carve-out from our state interest rate caps and loansharking law has resulted in a significant transfer of wealth from Hoosier families and communities to predominantly out-of-state companies," Jessica Fraser, director of the Indiana Institute for Working Families, said.
According to the report, in Indiana 60 percent of borrowers take a new loan on the same day an old loan is repaid and 82 percent of borrowers take another loan within 30 days.