texas appleseed. the texas market texas has 3300 payday and auto title locations across the state,...
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Texas Appleseed
The Texas Market• Texas has 3300 payday and auto
title locations across the state, in urban, suburban, and rural areas.
• Loan charges average 300%-600%APR.
• 3 of 4 borrowers rollover loans.
• 17,000 cars were repossessed in the first half of 2012—nearly 1 in 10 borrowers lost their vehicles.
Borrower Overview“It started out to help me over a temporary cash flow shortage and has turned into a
five-year nightmare.” –Nancy Oliver, Denton, Texas
• Loans are most often used for basic expenses, such as rent, utilities, and food. • Primary product appeal: speed, convenience, and guaranteed results
White Male10%
Nonwhite Male36%
Nonwhite Female
32%
White Female
22%
White Male; 22%
Nonwhite Male; 34%Nonwhite
Female; 20%
White Female;
23%
2009 Texas Payday Borrowers 2009 Texas Auto Title Borrowers
• Majority are 25-44 years old with incomes of $35,000 or less• More likely than general population to have credit score below 620 and no
credit cards.
Source: Texas Appleseed analysis of 2009 FINRA Financial Capacity Survey
Current Market Standards• Banks
– FDIC 2005 examination guidelines : 6 rollovers– FDIC Suggested Standards: 36% rate cap with 90 minimum term
• Credit Union– NCUA: 28% interest plus $20 fee (charged once per 6 months)– TCUC: 18% interest plus $20 fee (charged once per 180 days)
• Texas Licensed Lenders– Licensed and examined by OCCC– $20 fee/18% interest or $10 fee/$4 per $100 borrowed per month – Must consider borrower ability to repay the loan on-time
• Payday and Auto Title Lenders– Jan. 1, 2012: Licensed and examined by OCCC– Under CSO model, 10% rate cap, no fee cap– City ordinances in Dallas and Austin: 3 rollover/4 installment limit;
20% of monthly income; each payment must reduce principal by 25%.
Emerging Lending Approaches• Bank/Credit Union– FDIC Pilot: Amarillo National Bank; First Convenience Bank– REAL Solutions: Fort Worth City Credit Union
• Nonprofit – Lender Partner: Family Services of Greater Houston– Nonprofit Lender: Foundation Communities
• Finance Company– Progreso Financiero– Community Loan Center—Employer Partnership
Taking New Models to Scale
1. Basic standards for affordable credit to support fair competition in the small-dollar lending market.
2. Increasing participation of banks and credit unions in the small dollar loan space.
3. Replicating local nonprofit models.
4. Expanding models that can have statewide impact.
