OAKLAND, CA - Payday lending activity increased significantly in California from 2021 to 2022, according to an annual report released by the California Department of Financial Protection and Innovation (DFPI) last month. The report tracks the activity of 109 lenders who voluntarily reported their lending.  

The number of payday loans surged by over 18.4 percent and the dollar value by over 19.2 percent to $1.5 billion. Payday lenders issued this exploitative credit to more than 900,000 individual consumers, an increase of around 14 percent; all these levels had dropped in the state during the COVID pandemic. 

"The rebound in this predatory practice is troubling. We urgently need payday lending reform in California,” said Lucia Mattox, director of western states outreach and senior policy associate at the Center for Responsible Lending. “This is a practice that is designed to trap low-wage workers and struggling families in an endless cycle of debt that ruins any chance of building wealth and achieving financial security. State legislators owe it to their constituents to stop the predatory payday lending debt trap.” 

In California, payday lenders make loans of $300 or less with average annual interest rates of 460%. They are marketed as short-term loans, but their structure typically creates a long-term debt cycle lasting months, and borrowers often end up paying as much or more in interest as they originally borrowed. 

Indicators of financial distress among borrowers remained high, with returned check rates at the highest level in ten years, according to the report. In 2013, the percentage of returned checks was 5.81%; in 2022 it had reached 10.32%. 

The report also showed high levels of repeat borrowing which, along with the exorbitant interest rates, is a mark of the unaffordability of payday loans. The report showed that: 

  • Around 70% of payday loans were made to a borrower who had already taken out a payday loan in 2022 -- and out of these loans from repeat borrowers, 40% were made the same day that the previous transaction ended; 
  • 54% of payday loans were made to borrowers who took out four or more loans from the same lender in 2022; and  
  • 72% of payday loan fees collected in California in 2022 were paid by borrowers who took out seven or more loans from the same lender. 



Press Contact: Carol Parish carol.parish@responsiblelending.org

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