Savings Figures Could Flip to Fee Drain if Federal Threats to NC Consumer Protections Are Realized

DURHAM, N.C. – A new Center for Responsible Lending (CRL) analysis breaks down the $457 million that North Carolinians save each year through an interest rate cap on predatory payday and car title loans, calculating the fees that residents of each county and Congressional district would lose without that protection.

North Carolina enjoys strong protections against triple-digit interest loans that are designed to trap cash-strapped families in long-term debt. Payday loans were legal for four years in the state, from 1997 to 2001, after which payday lenders engaged in “rent-a-bank” schemes—violating North Carolina law by partnering with out-of-state banks. In 2006, the N.C. Attorney General and N.C. Commissioner of Banks shut down that practice. But now federal proposals threaten to erode those protections, including actions that would make “rent-a-bank” legal, exposing North Carolina families to triple-digit interest debt traps once again.

“A very large and diverse coalition of individuals and groups—including faith leaders, military advocates, civil rights groups and housing advocates—worked for years to rid our state of these loans as the destruction they caused to hardworking people became apparent,” said CRL Senior Policy Associate Susan Lupton, who co-authored the report. “Our congressional delegation in Washington must do everything they can to stand up for those hard-won protections. They must resist pressure from those who would subject North Carolinians and other Americans to a corrupt business model based on making loans to people they know cannot afford them.”

The ten counties that save the most annually by being free of payday and car title lending are as follow:

  • Mecklenburg, annual savings of $46 million
  • Wake, annual savings of $38 million
  • Guilford, annual savings of $24 million
  • Cumberland, annual savings of $19 million
  • Forsyth, annual savings of $16 million
  • Durham, annual savings of $13 million
  • Onslow, annual savings of $11 million
  • Gaston, annual savings of $11 million
  • Pitt, annual savings of $9.6 million
  • Buncombe, annual savings of $9.5 million

The analysis also ranks counties by their share of subprime borrowers. For example, Scotland County has a subprime population of 43.7%, compared to the overall subprime population in North Carolina of 30.8%. Robeson County, with a 43.4% share, and Hoke County, at 43% are also on the top of that list.

“Many of the counties most impacted by predatory payday and car title lending are rural counties,” said CRL Senior Researcher Delvin Davis, who co-authored the analysis. “Though their fee savings figures may be lower because of small populations, they have high rates of the subprime borrowers who are most vulnerable to predatory practices.”

A breakdown of fee savings by North Carolina’s 13 Congressional districts shows that each district saves at least $29 million per year in fees that would otherwise be stripped from the families who need those dollars the most and funneled to predatory lenders. District NC-09 saves the most, nearly $39.5 million per year, and is also home to one of the highest numbers of subprime borrowers, about 269,000.

CRL calls on Congress, including our North Carolina delegation, to defend the Consumer Financial Protection Bureau’s rule addressing payday and car title lending, which will protect families in states without interest rate caps and would protect North Carolina in the future if state consumer protections are eroded or evaded. CRL also calls on members to oppose any efforts to pre-empt state interest rate limits, to defend existing protections in the Military Lending Act, and to work to pass a 36% federal rate cap.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at carol.hammerstein@responsiblelending.org.