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Financial Services Law Insights and Observations

CFPB reports on use of payday, auto title, and pawn loans

Federal Issues CFPB Consumer Finance Payday Lending Auto Lending

Federal Issues

On May 5, the CFPB released a new report surveying the prevalence, persistence of use, and other credit sources accessible for consumers who utilize payday, auto title, and pawn loans. The report uses the first two rounds of the Bureau’s Making Ends Meet survey, which was conducted before the Covid-19 pandemic in June 2019, and offers a nationally representative assessment of consumers with credit records (covered by InfoBytes here). As such, the survey allows the possibility of combining a survey of the same consumers spanning over two years with credit record data to understand consumers’ decisions about debt. Report highlights include:

  • “In June 2019, 4.4 percent of consumers had taken out a payday loan in the previous six months, 2.0 percent had taken out an auto title loan, and 2.5 percent had taken out a pawn loan.” These consumers are more concentrated in the age group between 40 and 61. The report discloses that “because the number of consumers using these loans in the survey is small, there is some survey uncertainty in these estimates.”
  • “77 percent of consumers using alternative financial services experienced a shock and had difficulty paying a bill or expense during the same timeframe in which they also reported borrowing a payday, auto title, or pawn loan.”
  • “Payday, auto title, and pawn users who experience difficulty paying a bill or expense tend to also use other available credit, suggesting that for some consumers, these loans might be part of a broader and more complicated debt portfolio to deal with difficulties.”