Texas Appleseed The Texas Market Texas has 3300

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 2009 Texas Payday Borrowers White Female 22% White Male 10% 2009 Texas Auto Title Borrowers White Female; 23% White Male; 22% Nonwhite Male 36% Nonwhite Female 32% Nonwhite Female; 20% Nonwhite Male; 34% Source: Texas Appleseed analysis of 2009 FINRA Financial Capacity Survey • 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.

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.

Ann Baddour Senior Policy Analyst Texas Appleseed abaddour@texasappleseed. net www. texasappleseed. net