Payday Lending Reform


After the legalization of "payday lending" by the Washington Legislature in 1996, hard-working people frequently became ensnared in the payday lending “debt trap.” This predatory financial product was designed to create the “debt trap,” which results when payday loan customers repeatedly take out new loans to pay off old payday loans. Many borrowers, most of them low-income, took out dozens of payday loans each year, with interest rates as high as 391%. Advocates in the Working Families Project have been working to reform the payday loan industry whose business models are designed to profit from among the poorest consumers. This work culminated in successful legislation in 2010 with payday lending reforms that halted the most predatory practices of the industry.

According to a 2003 report by the Center for Responsible Lending, 91% of all payday loans nationally were made to repeat borrowers with five or more loans per year. The 2010 legislation in Washington limited payday loans to one loan at a time and no more than 8 payday loans per customer per year. As reported by Pro Publica, these provisions stopped the “debt trap” in our state, which ensnared thousands of the working poor.

The work to prevent payday lenders from watering down what regulations we have, and to add additional protections for consumers, is ongoing. Triple-digit interest rates can still be charged. The existing system is still, in many respects, "predatory." Our current advocacy goals are to maintain the existing consumer protections for payday customers and oppose the creation of new financial products with predatory lending components that contribute to the cycle of poverty.