Alarming Figures: Report discovers Hoosiers’ 2021 payday loan finance charges totaling $29 million

Hoosier borrowers may have saved over $26 million by the year 2021 if the state of Indiana had capped interest rates on “payday” loans at 36% APR.

Payday lenders made nearly $29 million in financing charges off of a mere $386 in average loan amounts over that time period.

Hoosiers in precarious financial straits are at risk from a system that lures and traps them, a vicious cycle from which they may find it difficult to break because of inadequate consumer safeguards.

Both brick-and-mortar and virtual moneylenders in Indiana must be licensed by the state’s Department of Financial Institutions.

Compared to 2016, when there were 32 registered payday lenders and 285 branches, there were only 17 registered lenders and 161 branches in 2021, a fall of 46% and 43%, respectively.

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Instant Payday Loans in Indiana

There are still regulations on small loans and payday loans in Indiana’s statutes. Borrowers can get a principal loan amount between $50 and $715, but it can’t be more than 20% of their monthly take-home pay. In 2023, a borrower can have no more than two active loans, and the total amount of all active loans cannot be more than $715.

Additional requirements include a 14-day minimum duration and a seven-day grace period between loans after six in a row.

Finally, fees are capped at 15% for the first $250, 13% for the next $250-$400, and 10% thereafter.

Proponents, however, call such loans “predatory,” pointing out that the lenders do not verify whether or not the borrowers can afford to pay them back.

Payday loans are excluded from the 72% APR cap on illegal loansharking in the state. Loan payments do not positively impact credit scores, but loan defaults do show up as collections accounts.

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