Payday loans dropped during pandemic, but Californians are ‘not out of the woods’
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A new report found a dramatic decrease in Californians‘ reliance on payday loans as a direct result of pandemic-related government assistance, including unemployment benefits, rent relief, eviction moratoriums, stimulus checks and loan forbearance. But experts warn that use of payday loans is expected to rebound once government assistance ends.
Pandemic government assistance may have helped some Californians avoid using expensive payday loans last year, but some experts say it might be too early to celebrate.
A new report found that in 2020, California saw a 40% , a drop equivalent to $1.1 billion. Almost half a million fewer people didn’t rely on payday loans, a 30% drop compared to 2019.
Despite the unprecedented job loss triggered by the pandemic last year, government-funded financial aid was enough to acutely impact the payday loan industry, according to the California Department of Financial Protection and Innovation. The new state department released the report last week as part of its ongoing effort to regulate and oversee consumer financial products.
The report comes on the heels of California’s new $262.6 billion budget, with multiple programs aimed at reducing economic inequality within the state. An unprecedented $11.9 billion will be spent on Golden State Stimulus payments, a one-time benefit not set to continue in years to come.
“With those benefits going away, we do expect there to be potentially an uptick (in payday loans),” said department spokesperson Maria Luisa Cesar.
Only temporary relief
Industry representatives, state regulators and consumer advocates agree: government assistance helped Californians avoid their reliance on payday loans-short-term, high-interest loans that must be paid back in full when borrowers get their next paycheck. Additional reports found that California’s trend mirrors trends in other states. „Payday loans dropped during pandemic, but Californians are ‘not out of the woods’“ weiterlesen