ELKHART — A new report by the Indiana Institute for Working Families and the Indiana Assets & Opportunity Network indicates that payday loan companies are collecting an exorbitant amount of funds from Hoosiers and Elkhart County residents.
The report claims that over the past five years, companies based primarily out-of-state have collected more than $300 million in financial charges from residents of Indiana.
Elkhart County boasts seven of the 86 payday storefronts statewide, with the majority located Marion County.
The report indicates that an estimated $8,600,000 has been collected on loans that are typically about $350.
The average borrower makes $19,000 per year and is disproportionately located in low-income neighborhoods and areas where minority populations run high.
In 2018, the statewide result was an estimated $1,500,000 lost in interest.
Brightpoint, a private, 501(c)(3) nonprofit organization geared at removing the causes and conditions of poverty statewide, issued a press release on Wednesday morning discussing the issue.
“We know that the average borrower takes out eight consecutive loans, illustrating the fact that the majority of borrowers do not get their initial need met, but instead get caught in a costly cycle of debt that leaves them worse off,” said Steve Hoffman, Brightpoint President/CEO. “Who would logically pay an average of 365 percent annual interest eight times on a loan if not caught in a debt trap?”
Brightpoint is working in conjunction with community groups, veteran organizations, faith leaders and other social service agencies to seek for a return to the 36 percent APR cap Indiana had in place prior to 2002. During that year’s legislation, the Indiana General Assembly granted an increase which allowed for up to 391 percent APR on small, short term loans, the press release from Brightpoint indicates.
The Indiana Assets & Opportunity Network report states that if interest rate caps returned to 36 percent, it would amount to roughly $7,780,000 in savings for short-term Hoosier lessees over the next five years. The U.S. Department of Defense and 17 states have implemented rate caps of 36 percent APR or lower.
To get more information on the report, visit http://incap.org/documents/Financial_Drain_Report2019.pdf