BOISE – The number of licensed payday lenders dropped 34 percent last year. Expected new federal regulations could be the cause of the decrease.
The Idaho Statesman reported the number of payday lenders decreased from 223 to 147 in 2015, according to the Idaho Department of Finance.
State officials say the decrease could also mean the industry is on the decline.
The new federal regulations are expected to require lenders to make sure borrowers can repay their loans, to limit such loans to 45 days and to establish a 60-day “cooling off” period after a borrower has taken out three loans in a row.
The rules are being drafted by the Consumer Financial Protection Bureau, which was created under the Dodd-Frank Wall Street reform act of 2010.
“The bureau is particularly concerned that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between re-borrowing, defaulting, or falling behind on other obligations,” bureau spokesman David Mayorga told the Statesman. “We are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of account closure.”
According to the bureau, most payday loans have finance charges of $15 or $20 for each $100 borrowed. For the two-week term typical of a payday loan, these fees equate to an annual percentage rate ranging from 391 percent to 521 percent. Idaho does not cap the loan rates.
Idaho does not ask why payday or title lenders do not renew licenses so they don’t have detailed information about why the businesses are closing, said Consumer Finance Bureau Chief Mike Larsen.
“What we are hearing and reading nationally is the lenders are saying they cannot afford to stay in the business,” Larsen said.
The Statesman asked more than a dozen national and local payday-loan companies why they closed some or all of their Idaho stores. They either did not return calls or would not comment. The industry’s trade group, the Community Financial Services Association, also did not return calls.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.