A report released Monday from the Haas Center at the University of West Florida contradicts an earlier report on payday loans in Florida. The Research Institute on Social and Economic Policy at Florida International University in Miami released a report in late summer that said the Pensacola region was responsible for close to 40 percent of the state’s payday loan transactions in 2012, far more than any other metropolitan area in Florida.
Dr. Rick Harper, the Director of the University of West Florida's Office of Economic Development and Engagement and a past director of the Haas center which issued the new report said those numbers "didn't seem like they could be right." Haas Center staff started investigating the numbers and, as it turned out, there were errors in the FIU report. Harper said the work from the Haas Center "updates and corrects that earlier finding."
Payday lending is a multi-billion dollar business in Florida, one of 38 states where the loans are legal. They are short term loans...usually to be paid off by the clients next paycheck, that charge high interest rates and high origination fees. For the most part they are used by low income workers to get cash advances to pay day to day bills in between paychecks. The problem comes when a borrower pays the loan from their paycheck...there's not enough money left so they need another loan. It's a very expensive cycle. Harper says the "effective interest rate", which takes into account the upfront fees the loans generate, could be up to an annual rate of over 300 percent.
The new report from the Haas center found that, according to the Florida Office of Financial Regulation, people in the Pensacola area actually use fewer payday loans than the state average. Of Florida's 67 counties, Escambia ranked 27th in payday loan use...Okaloosa is 28th and Santa Rosa is 51st. On average in Florida, again according to the state Office of Financial Regulation, lenders issue 1.87 loans per person. Escambia County is 12 percent lower than that average at 1.84 loans per person. Santa Rosa County's average is 1.21 loans per person and Okaloosa County stands at 1.83.
The Haas Center report found that the highest number of payday loans were issued in Osceola County in the Orlando area. The next highest was Hillsborough County in the Tampa area. both of those counties have an average of close to 5 payday loans per person. Dr. Harper says that it is mostly low to middle income people living in cities who use payday loans, the people who can least afford them.