According to a report by the California Department of Business Oversight, an increasing number of cash-strapped California seniors are turning to high-interest payday loans to get by. A payday loan is a short-term loan where someone borrows a small amount of money at a very high rate of interest. The report revealed that the average annual percentage rate (APR) charged for payday loans last year was a whopping 372 percent, up from an average of 366 percent in 2015. Compare the average APR on credit cards, which ranges from about 12 percent to about 30 percent, to the APR on a payday loan and its shocking how bad the situation is for some senior citizens. Nancy McPherson, the Pasadena-based state director for AARP California, states:
Many people in California are struggling because of the high cost of housing. We understand that people need access to capital — that’s a given. But it shouldn’t be done this way. It makes a person’s financial situation worse by charging such high fees. It’s predatory lending.
Californians 62 and older accounted for 23.4 percent of the 2016 total number of people that took out a payday loan, and senior citizens took out nearly 2.7 million loans, which is a nearly three-fold increase from the previous year. Under California law, a person can only borrow a maximum amount of $300 through a payday loan. Unfortunately, many senior citizens are on fixed incomes and many of them are low income citizens and are essentially forced into seeking out payday loans. Senate Bill 318 was passed in 2014 and it created the Pilot Program for Increased Access to Responsible Small Dollar Loans to increase the availability of small-dollar installment loans ranging from at least $300 but less than $2,500 while reining in interest rates. Something must be done to further help senior citizens because they should not be resorted to having to rely on payday loans to get by in life.