SACRAMENTO, Calif.—The number of payday lenders and payday lender borrowers in California declined sharply in 2020, despite the initial high unemployment rates driven by the pandemic, a new report shows.
The California Financial Protection and Innovation Division (DFPI) reported a 40% reduction in payday loans in 2020, according to its 2020 Annual Report on Payday Loan Activities.
In a statement, Christopher S. Schultz, deputy commissioner of the DFPI, said he believes payday loans declined in the state during the pandemic for a number of reasons, including factors such as stimulus checks, loan deferments, and increased alternative lending options.
Payday loan lenders suffered losses of over $ 1.1 billion in 2020, compared with the total amount of payday loans in 2019, California News Times said.
Reasons for Decline
“The decline is probably a combination of additional government payments like stimulus and increased unemployment, and the impact of not being able to pay rent, student loans and, in some cases, utility bills is lessened,” Schultz said.
Meanwhile, Gabriel Krabitz, head of consumer finance projects at The Pew Charitable Trust, noted his organization’s research shows seven out of 10 borrowers use payday loans to pay for recurring bills.
“As pandemic measures are shrinking, the amount of loans and the number of borrowers may recover,” said Krabitz.