SB 17 Testimony: Committee on Commerce, Labor, and Energy

SB 17 Testimony: Committee on Commerce, Labor, and Energy Dr. Justin S Gardner, PhD Innovative Research and Analysis LLC Applied Research and Policy Institute Hello Senate Members of the Committee on Commerce, Labor and Energy. My name is Dr. Justin S Gardner of Innovative Research and Analysis and the Applied Research and Policy Institute. I would like to begin by thanking the members of this committee and the Office of the Nevada Treasurer for the opportunity to testify today on Senate Bill 17. www.innov8reanalysis.com www.policyapplied.org 1

Introduction and Overview Policy Perspective Industry Profile Borrower Profile Problem and Need Clark County by Zip Code State and National Data Comparison Nevada Veteran Data Summary SB 17 Policy Implications & Opportunities Questions My testimony today will include a discussion of policies at the national and state level, research findings from substantive literature in terms of industry profile of short term, small dollar lenders (payday loans, cash advance services, and title loans). From there I will present state data that highlights the existing problems with current legislation and the need for legislative action. This section will focus on Clark County data, state and national comparisons, and reported primary data for Nevada veterans studies I have conducted or been involved with. Finally, I will conclude with an assessment of SB 17 to include considerations, implications and opportunities from the proposed version of SB 17. 2

Policy Perspective Permissive Payday States account for 55% of US population: 2 states have no reported data (7.4%) 8 states had less than 300 interviews (29.6%) 17 states (63%) had an average usage rate of 7.35% Hybrid Payday States account for 16% of US population: 3 states had less than 300 interviews (33.3%) 6 states (66.7%) had an average usage rate of 6.33% Restrictive Payday States account for 29% of US population: 6 states had less than 300 interviews (40.0%) 9 states (60.0%) had an average usage rate of 3.0% http://www.pewtrusts.org/en/multimedia/data visualizations/2014/state payday loan regulationand usage rates From a national perspective, legislation concerning payday loans has increased over the past several years with three separate types of regulations as defined by the Pew Charitable Trusts as shown in the graphic. The online interactive version of this map provides state by state payday loan utilization rates from primary data collection and reporting efforts by Pew. To summarize these three areas of regulation, Permissive Payday states allow for interest rates that can exceed 391% and account for 55% of the US population. Of the 27 states included in this group, 2 (Alaska and Hawaii) were not surveyed and 8 had fewer than 300 responses and therefore coded as N/A. That leave 17 states or 63% of permissive states with an average reported usage rate of payday loans equal to 7.35%. Switching focus to Hybrid Payday states, which make up 16% of the US population have existing regulations that meet 1 or more of 3 Pew requirements, which include lower interest rates, limits on annual loan usage, and longer repayment periods. Of the 9 states in this group, 6 or 67%, had an average payday lending usage rate of 6.33%. Finally the Permissive Payday states, which account for 29% of the US population and are commonly found on the Eastern Seaboard with some exceptions have stringent payday lending laws and no storefronts. Of the 15 states in this group, 9 or 60% had an average payday usage rate of 3.0%. From the summary of payday lending usage data based on these three regulation types, there is an apparent and observable relationship between increased regulations and decreased payday lending usage. 3

Infographic: http://www.pewtrusts.org/en/multimedia/data visualizations/2014/statepayday loan regulation and usage rates The Pew Charitable Trusts, State Payday Loan Regulation and Usage Rates Downloadable Report: http://www.pewtrusts.org/en/multimedia/datavisualizations/2014/~/media/data%20visualizations/interactives/2014/state%20payday%2 0loan%20regulation%20and%20usage%20rates/report/state_payday_loan_regulation_an d_usage_rates.pdf 3

Policy Perspective: Nevada Current Legislation Summary Current payday related legislation is considered permissive by Pew standards Loan term not to exceed 35 days with exceptions to extend to 90 days if: Loan provides for installment payments Payments are to ratably and fully amortize entire amount (principal and interest) Loan is not subject to any extension Loan does not require any balloon payment (no regulation on finance charges) Nevada is currently considered to be a permissive state under the Pew criteria with the current legislation including: Loan term not to exceed 35 days with exceptions to extend to 90 days if; a. Loan provides for installment payments b. Payments are to ratably and fully amortize entire amount (principal and interest) c. Loan is not subject to any extension d. Loan does not require any balloon payment (no regulation on finance charges) Chapter 604A of NRS The Pew Charitable Trusts, State Payday Loan Regulation and Usage Rates Downloadable Report: http://www.pewtrusts.org/en/multimedia/datavisualizations/2014/~/media/data%20visualizations/interactives/2014/state%20payday %20loan%20regulation%20and%20usage%20rates/report/state_payday_loan_regulatio n_and_usage_rates.pdf 4

Industry Profile Industry Background 1990s payday storefronts begin to emerge in market place 2000s industry wide estimated $40 $50 billion annual profits Business practice designed to profit more with recurrent customers Industry Research Findings Found in higher densities in communities/zip codes with lower density of available banking options Higher density in and near military bases and communities, which have higher concentration of veterans Identified neighborhood effect between payday storefronts in customer community From the financial and industry related background literature, payday storefronts were almost non existent in 1990 with storefronts beginning to emerge during the early 1990s. By the early 2000s, estimates reported more than 10,000 15,000 storefronts, which increased to more than an estimated 25,000 storefronts before the end of the decade. As early as 2003 through 2010 industry wide annual profits ranging between $40 to $50 billion dollars. Additionally, research has found business practices of payday and similar lending options designed to profit more from recurrent customers in lieu of sporadic use customers. Some of the substantive findings in the literature that will be discussed in subsequent slides include: a. Found in higher densities in communities/zip codes with lower density of available banking options b. Higher density in and near military bases and communities, which have higher concentration of veterans c. Identified neighborhood effect between payday storefronts in customer community Citations for Industry Background: Caskey, J.P. (2010). Payday Lending: New Research and the Big Question. (FRB of Philadelphia Working Paper No. 10 32). Retrieved from the Social Science Research Network website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1696019. Melzer, B.T. (2011). The Real Costs of Credit Access: Evidence from the Payday Lending 5

Market. Quarterly Journal of Economics, 126, 517 555. The Pew Charitable Trusts July 2012 Report: Who Borrows, Where They Borrow, and Why, http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2012/pewpaydayle ndingreportpdf.pdf Payday Loan Facts and the CFPB s Impact, The Pew Charitable Trusts, http://www.pewtrusts.org/en/research and analysis/fact sheets/2016/01/payday loanfacts and the cfpbs impact Stegman, M.A. & Faris, R. (2003) Payday Lending: A Business Model that Encourages Chronic Borrowing. Economic Development Quarterly, 17:1, 8 32. Citations for Industry Research: Caskey, J.P. (2010). Payday Lending: New Research and the Big Question. (FRB of Philadelphia Working Paper No. 10 32). Retrieved from the Social Science Research Network website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1696019. Graves, S.M. & Peterson, C.L. (2005). Predatory Lending and the Military: The Law and Geography of Payday Loans in Military Towns. Ohio State Law Journal, 66:4, 653 832. Luther, R.K., Garman, E.T., Leech, I.E., Griffitt, L. & Gilroy, T. (1997). Scope and Impact of Personal Financial Management Difficulties of Service Members on the Department of the Navy. (MFI Technical Report 97 1). Retrieved from the Military Family Institute at Marywood University. Melzer, B.T. (2011). The Real Costs of Credit Access: Evidence from the Payday Lending Market. Quarterly Journal of Economics, 126, 517 555. 5

Borrower Profile Borrower Profile: Demographic highlights: White females ages 25 44 (most common borrowers) African Americans Separated or Divorced Annual income of less than $40,000 $50,000 annually Less than a Four year College Degree Home Renters Borrower Research Findings: Average borrower takes out 8 loans annually at $375 each with annual interest spending of $520. Storefront loans more common than online loans 75% storefront vs. 25% online Most common needs for payday loans are recurring expenses (utilities, credit cards, rent or mortgage, food, etc.) 69% of first time borrowers using loan for recurring expenses 16% of first time borrowers using loan for unexpected expenses Research on payday lending and similar loans has also focused a great deal on identifying common indicators or attributes of borrowers. These include demographic, socioeconomic, lending behaviors, and lending needs. To Summarize the Borrower Profile, the most common borrowers from a Pew study were white females age 25 44, but most at risk individuals from research findings are African Americans, Separated or Divorced, Home Renters, have an annual income between $15,000 $50,000, often less than $40,000, and have less than a four year degree. Additional research findings from research literature include: a. Average borrower takes out 8 loans annually at $375 each with annual interest spending of $520. b. Storefront loans more common than online loans a. 75% storefront vs. 25% online c. Most common needs for payday loans are recurring expenses (utilities, credit cards, rent or mortgage, food, etc.) a. 69% of first time borrowers using loan for recurring expenses b. 16% of first time borrowers using loan for unexpected expenses Caskey, J.P. (2010). Payday Lending: New Research and the Big Question. (FRB of Philadelphia Working Paper No. 10 32). Retrieved from the Social Science Research 6

Network website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1696019. Melzer, B.T. (2011). The Real Costs of Credit Access: Evidence from the Payday Lending Market. Quarterly Journal of Economics, 126, 517 555. The Pew Charitable Trusts July 2012 Report: Who Borrows, Where They Borrow, and Why, http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2012/pewpaydayle ndingreportpdf.pdf Payday Loan Facts and the CFPB s Impact, The Pew Charitable Trusts, http://www.pewtrusts.org/en/research and analysis/fact sheets/2016/01/payday loanfacts and the cfpbs impact Stegman, M.A. & Faris, R. (2003) Payday Lending: A Business Model that Encourages Chronic Borrowing. Economic Development Quarterly, 17:1, 8 32. 6

Clark County Data by Zip Code Study area selected within Clark County based on existence of payday lending storefronts. Clark County selected based on percentage of statewide population (73.2%). Population summarized for comparative analysis with zip codes and bank locations based on study area and Clark County. Median Household Annual Income and Bank Locations selected based on research findings from available literature. To assess the financial landscape in Nevada with respect to the need for payday lending legislation, a comparative analysis was conducted within Clark County based on zip codes. The study area was determined based on the existence of payday loan storefronts and Clark County was selected based on its population size as the largest county in Nevada with 73.2% of the population. Population was included in this and subsequent tables as a comparative method with bank locations within zip codes. Median household income and bank locations were both selected based on literature findings as previously presented. As can be seen from the table on the slide, there are 44 zip codes in the study area that makes up 72.1% of zip codes as displayed on maps (presented in subsequent slides). The study area includes: 405 payday storefronts, almost 1.9 million residents (85.5% of Clark County), an average median income of $52,000 which matches county reported median income, and 297 bank locations (90.3% of county wide locations). Same Day Payday. (2015). Payday Lenders in Nevada by Cities. 7

https://www.samedaypayday.com/nevada Payday Loan (access April 29, 2015). Clark County Department of Comprehensive Planning Population Estimate 2016, http://www.clarkcountynv.gov/comprehensiveplanning/demographics/documents/population%20by%20zip%20code%202 016.pdf SectorLytics custom online graphic created on contract with Innovative Research and Analysis, http://sectorlytics.org/payday_project/c3.html U.S. Census Bureau 2015 State Data, 2011 2015 Aggregates, http://www.census.gov/quickfacts/table/pst045215/32003 Yellow Books online search for bank locations in Clark County, NV, http://www.yellowbook.com/s/banks/clark county nv/ 7

Clark County Zip Code Data by Payday Storefronts, 1 10 Breaking out the data from the previous slide into zip code by zip code presentation and sorting by number of payday storefronts provided an opportunity to discuss similarities and differences within the study area. The remaining slides of zip codes 11 44 were removed from this presentation, but were included in the PDF version of this presentation. As shown here the 10 zip codes with the most payday loans have 59.8% of the payday storefronts, 21.1% of the county population, an average median income of $37,000 annually, and 21.0% of banks. The zip code with the most payday loans, 89101 accounts for 10.9% of storefronts, 1.9% of the county population, a median income of $22,000 annually (the most impoverished zip code in the study area), and 1.2% of the banks in Clark County. The following slides present a map of payday loan storefronts, bank locations, and median income followed by a comparative display of the payday maps with bank and median income maps. Same Day Payday. (2015). Payday Lenders in Nevada by Cities. 8

Clark County Zip Code Data by Payday Storefronts, 11 20 Same Day Payday. (2015). Payday Lenders in Nevada by Cities. https://www.samedaypayday.com/nevada Payday Loan (access April 29, 2015). Clark County Department of Comprehensive Planning Population Estimate 2016, http://www.clarkcountynv.gov/comprehensiveplanning/demographics/documents/population%20by%20zip%20code%202016. pdf SectorLytics custom online graphic created on contract with Innovative Research and Analysis, http://sectorlytics.org/payday_project/c3.html U.S. Census Bureau 2015 State Data, 2011 2015 Aggregates, http://www.census.gov/quickfacts/table/pst045215/32003 Yellow Books online search for bank locations in Clark County, NV, http://www.yellowbook.com/s/banks/clark county nv/ NOTE: This slide was removed from presentation, but included in PDF this print out of presentation for review and reference. 9

Clark County Zip Code Data by Payday Storefronts, 21 29 Same Day Payday. (2015). Payday Lenders in Nevada by Cities. https://www.samedaypayday.com/nevada Payday Loan (access April 29, 2015). Clark County Department of Comprehensive Planning Population Estimate 2016, http://www.clarkcountynv.gov/comprehensiveplanning/demographics/documents/population%20by%20zip%20code%202016. pdf SectorLytics custom online graphic created on contract with Innovative Research and Analysis, http://sectorlytics.org/payday_project/c3.html U.S. Census Bureau 2015 State Data, 2011 2015 Aggregates, http://www.census.gov/quickfacts/table/pst045215/32003 Yellow Books online search for bank locations in Clark County, NV, http://www.yellowbook.com/s/banks/clark county nv/ NOTE: This slide was removed from presentation, but included in this PDF print out of presentation for review and reference. 10

Clark County Zip Code Data by Payday Storefronts, 30 44 Same Day Payday. (2015). Payday Lenders in Nevada by Cities. https://www.samedaypayday.com/nevada Payday Loan (access April 29, 2015). Clark County Department of Comprehensive Planning Population Estimate 2016, http://www.clarkcountynv.gov/comprehensiveplanning/demographics/documents/population%20by%20zip%20code%202016. pdf SectorLytics custom online graphic created on contract with Innovative Research and Analysis, http://sectorlytics.org/payday_project/c3.html U.S. Census Bureau 2015 State Data, 2011 2015 Aggregates, http://www.census.gov/quickfacts/table/pst045215/32003 Yellow Books online search for bank locations in Clark County, NV, http://www.yellowbook.com/s/banks/clark county nv/ NOTE: This slide was removed from presentation, but included in this PDF print out of presentation for review and reference. 11

Clark County Data by Zip Code, Payday Storefront Map As you can see from this map, there is a higher concentration of zip codes with 6 or more payday loan storefronts in one definable area of Clark County as shown by the blue rectangle. The high concentration of payday storefronts as visually depicted differs from the banking industry. Payday Storefront Data Source (modified address search): Same Day Payday, https://www.samedaypayday.com/nevada Payday Loan Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php 12

Clark County Data by Zip Code, Median Income Map Switching now to a view of Median incomes by zip code, the higher income zip codes are observed in the peripheral areas as shown on the map with the lowest income areas found in the more centrally located zip codes of the study area. If we again add the payday specific zone rectangle, we can see that the 8 zip codes with less than $40,000 in annual household income exist within the payday zone. Median Income by Zip Code Data Source: Custom Table (SectorLytics), http://sectorlytics.org/payday_project/c3.html Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php 13

Clark County Data by Zip Code, Bank Locations Map Looking at bank locations in the study area, the highest reported number of banks per zip code is less 19 than payday storefronts 44 (89101) and are more evenly distributed across the study area. If we add the same payday concentration rectangle we can see there are appears to be less bank locations that payday storefronts in the highlighted area, most specifically the northern portion of the area. Bank Locations Data Source: Yellow Book, http://www.yellowbook.com/s/banks/clarkcounty nv/ Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php 14

If we revisit the payday storefronts and median income maps again, the disparity of income in zip codes with higher reported payday storefronts is immediately apparent. As previously mentioned, the 8 most impoverished zip codes are found within the payday zone make up 18.2% of the entire study area. These same 8 zip codes have 145 payday storefronts, which accounts for 35.8% of all storefronts in the study area. If we expand beyond those 8 zip codes to the entire highlighted zone, the rectangle encompasses 23 of 44 zip codes, or 52.3% of the study area and just over a million residents that account for 46.3%. From an income perspective, these 23 zip codes have an average median income of $42,000 annually and 82.7% (335) of payday storefronts. Median Income by Zip Code Data Source: Custom Table (SectorLytics), http://sectorlytics.org/payday_project/c3.html Payday Storefront Data Source (modified address search): Same Day Payday, https://www.samedaypayday.com/nevada Payday Loan Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php 15

Revisiting the payday and banking maps, the differences previously discussed are clearly visible both within and outside of the payday zone rectangle. Recalling from the discussion of the literature, lower densities of bank locations has been observed in high density payday lending areas. For a number of the highest concentration of payday zip codes this finding is observable, most specifically in the norther section of the highlighted zone. The highlighted zone, which consists of 52.3% of study area zip codes and 46.3% of the county population has 82.7% of payday storefronts and 52.9% of the bank locations in the county. Payday Storefront Data Source (modified address search): Same Day Payday, https://www.samedaypayday.com/nevada Payday Loan Bank Locations Data Source: Yellow Book, http://www.yellowbook.com/s/banks/clark county nv/ Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php 16

Median Income by Zip Code Data Source: Custom Table (SectorLytics), http://sectorlytics.org/payday_project/c3.html Bank Locations Data Source: Yellow Book, http://www.yellowbook.com/s/banks/clark county nv/ Base Map Data Source: Get Healthy Clark County, http://www.gethealthyclarkcounty.org/places2play/zip code map.php NOTE: This slide was removed from the presentation, but included in this printable PDF version for review and reference. 17

Problem and Need: Nevada Dynamics and Borrower Profile Statewide reported data for Nevada population that does not align with Borrower Profile at risk indicators (compared to national average) 1.0% below for Income Poverty Rate (13.5%) Statewide reported data for Nevada population aligns with Borrower Profile at risk indicators (compared to national average) 12.1% above for Liquid Asset Poverty Rate (55.6%) 14.5% above for Extreme Asset Poverty Rate (31.5%) 0.2% above for Unbanked Households (7.9%) 4.7% above for Underbanked Households (24.7%) 9.5% below for Homeownership Rate (53.6%) 7.0% below for Four Year College Degree (23.1%) 7.0% below for Two Year College Degree (31.2%) From a secondary data perspective from the Corporation for Enterprise Development Assets and Opportunities Scorecard, the population of Nevada is aligned with both the industry and borrower profiles based on a number of indicators. The one indicator where Nevada is positively found below the national average is with regards to income poverty rate at 1.0% below the national average. This indicates from an employment or income perspective, Nevadans are fairing on average better than the national average with only 13.5% of the population making annual income below the federal poverty level. Digging deeper into available data with regards to financial assets and income, Nevada has a statewide liquid asset and extreme asset poverty rate well above the national average at 55.6%, 12.1% above, and 31.5%, 14.5% above respectively. These findings indicate more than half of Nevadans have insufficient assets to subsist at the poverty level for three months without income. Additionally, nearly a third of Nevadans have a negative net worth. Further compounding these findings are seen in the rate of unbanked, 7.9% 0.2% above the national average and underbanked, 24.7% 4.7% above the national average. Considering the definition of underbanked, which is: individuals with a checking and/or checking account with reported usage of non bank money orders, check cashing services, non bank remittances, payday loans, rent to own services, pawn shops or refund anticipated loans in the past 12 months, this finding is clearly indicative of population dynamics in Nevada that align directly with industry and borrower profiles as previously discussed. Additional Nevada population dynamics that align with industry and borrower 18

profiles are the homeownership rate, 9.5% below national average, and four year college degree rate, 7.0% below the national average. Cumulatively these findings indicate Nevada as a target market for payday and similarly designed lenders. CFED A&O Scorecard: Finance Assets and Income, Housing and Homeownership, and Education Scorecards, http://assetsandopportunity.org/scorecard/ Income Poverty: income below federal poverty threshold Liquid Asset Poverty: insufficient assets to subsist at the poverty level for three months without income Extreme Asset Poverty: negative net worth Unbanked: neither a checking nor savings account Underbanked: individuals with a checking and/or checking account with reported usage of non bank money orders, check cashing services, non bank remittances, payday loans, rent to own services, pawn shops or refund anticipated loans in the past 12 months. Homeownership rate: percent of housing units that are owner occupied Two year degree: percent of 25+ who have at least a two year college degree Four year degree: percent of 25+ who have at least a four year college degree NOTE: Slide presenting indicator by indicator data were removed from this presentation, but provided in the printable PDF version for review and reference. 18

Problem and Need: Nevada Dynamics and Borrower Profile Poverty Rate Comparisons, National Average and Regional Neighbors (Restrictive AZ, Hybrid CO, Permissive UT) 55.6% 43.5% 45.7% 39.2% 31.7% 31.5% 14.5% 13.5% 16.0% 11.5% 11.1% 17.0% 21.3% 15.2% 17.8% INCOME POVERTY RATE LIQUID ASSET POVERTY RATE EXTREME ASSET POVERTY US Average Nevada Arizona Colorado Utah http://assetsandopportunity.org/scorecard/ CFED A&O Scorecard, Financial Assets and Income Scorecard, Custom Graphs by Poverty Type modified for development of Slide 18, http://assetsandopportunity.org/scorecard/ Income Poverty: income below federal poverty threshold Liquid Asset Poverty: insufficient assets to subsist at the poverty level for three months without income Extreme Asset Poverty: negative net worth NOTE: This slides was removed from the presentation and condensed into a single slide (preceding slide in this print out). 19

Problem and Need: Nevada Dynamics and Borrower Profile Banking Comparisons, National Average and Regional Neighbors (Restrictive AZ, Hybrid CO, Permissive UT) 24.7% 20.0% 17.6% 17.3% 12.8% 13.0% 7.7% 7.9% 6.4% 3.3% UNBANKED UNDERBANKED US Average Nevada Arizona Colorado Utah http://assetsandopportunity.org/scorecard/ CFED A&O Scorecard, Financial Assets and Income Scorecard, Custom Graphs by Banking Data modified for development of Slide 19, http://assetsandopportunity.org/scorecard/ Unbanked: neither a checking nor savings account Underbanked: individuals with a checking and/or checking account with reported usage of non bank money orders, check cashing services, non bank remittances, payday loans, rent to own services, pawn shops or refund anticipated loans in the past 12 months. NOTE: This slides was removed from the presentation and condensed into a single slide. 20

Problem and Need: Nevada Dynamics and Borrower Profile Homeownership Comparisons, National Average and Regional Neighbors (Restrictive AZ, Hybrid CO, Permissive UT) 63.1% 61.1% 63.9% 69.2% 53.6% HOMEOWNERSHIP RATE US Average Nevada Arizona Colorado Utah http://assetsandopportunity.org/scorecard/ CFED A&O Scorecard, Housing and Homeownership Scorecard, Custom Graphs by Homeownership modified for development of Slide 20, http://assetsandopportunity.org/scorecard/ Homeownership rate: percent of housing units that are owner occupied NOTE: This slides was removed from the presentation and condensed into a single slide. 21

Problem and Need: Nevada Dynamics and Borrower Profile Higher Education Attainment Comparisons, National Average and Regional Neighbors (Restrictive AZ, Hybrid CO, Permissive UT) 46.6% 38.3% 38.2% 36.0% 41.0% 30.1% 27.6% 31.1% 31.2% 23.1% FOUR YEAR COLLEGE DEGREE TWO YEAR COLLEGE DEGREE US Average Nevada Arizona Colorado Utah http://assetsandopportunity.org/scorecard/ CFED A&O Scorecard, Education Scorecard, Custom Graphs by Higher Education Degree Attainment modified for development of Slide 21, http://assetsandopportunity.org/scorecard/ Two year degree: percent of 25+ who have at least a two year college degree Four year degree: percent of 25+ who have at least a four year college degree NOTE: This slides was removed from the presentation and condensed into a single slide. 22

Problem and Need: Nevada Veteran Data Summary Fall 2014 Survey 71.0% reported $50,000 or less in annual household income 53.5% had final rank between E5 to E9 19.4% reported previous use of a payday loan or cash advance service Online stores accounted for less than 15% of loans 57.5% accessed payday lending since leaving active duty, 49.3% in the past 12 months, and 38.4% reported an existing debt to a payday lender. Fall 2015 Survey 40.9% reported $50,000 or less in annual household income 59.1% had final rank between E5 to E9 20.9% reported previous use of a payday loan, cash advance service, or title loan Online stores accounted for less than 15% of loans 79.0% accessed payday lending since leaving active duty, 39.5% in the past 12 months, and 29.0% reported an existing debt to a payday lender. Additional information is included in the PDF printed version, the 2014 survey was predominantly student veterans (over 70%), which explains some of the differences between annual reported data. Those differences aside, there was a higher utilization rate among 2015 respondents who also had higher average loan dollar compared to 2014 results. As is displayed, the most common reported income group was less than $50,000 in both years, most reported final rank grouping was E 5 to E 9 for both years, which is commonly reported in the research as the most at risk group of veterans by ranking for financial insecurity and other transition related outcomes. From a payday loan specific perspective, neither group accessed online loans for more than 15% of all loans. In terms of lending behaviors, 2014 results found 57.5% accessed payday lending since leaving active duty, 49.3% in the past 12 months, and 38.4% reported an existing debt to a payday lender. Comparatively, 2015 results found 79.0% accessed payday lending since leaving active duty, 39.5% in the past 12 months, and 29.0% reported an existing debt to a payday lender. Stream, C., Gardner, J.S., & Ralphs, B. (2015). Nevada Veterans Survey. School of Environmental and Public Affairs, University of Nevada, Las Vegas, Las Vegas, Nevada. Gardner, J.S. & Stream, C. (2015, December). Exploring the Financial Landscape Facing 23

Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans. Veterans Policy Leadership Institute. Accessible online: http://vpliresearch.org/unlv sepa studentwins award/ PAPOR Annual Conference, December 2015 Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans 2014 UNLV PUA 727 Survey (Data File) 2015 UNLV PUA 723 Survey (Data File) 23

Problem and Need: Nevada Veteran Data Summary Fall 2014 Survey 71.8% students with varying employment from full time, part time, and unemployed looking for work following graduation 71.0% reported $50,000 or less in annual household income Fall 2015 Survey 27.1% students with most common status unemployed and looking for work following graduation and parttime 40.9% reported $50,000 or less in annual household income Stream, C., Gardner, J.S., & Ralphs, B. (2015). Nevada Veterans Survey. School of Environmental and Public Affairs, University of Nevada, Las Vegas, Las Vegas, Nevada. Gardner, J.S. & Stream, C. (2015, December). Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans. Veterans Policy Leadership Institute. Accessible online: http://vpliresearch.org/unlv sepa studentwins award/ PAPOR Annual Conference, December 2015 Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans 2014 UNLV PUA 727 Survey (Data File) 2015 UNLV PUA 723 Survey (Data File) NOTE: Removed from the presentation, but included in this PDF version for review and reference. 24

Problem and Need: Nevada Veteran Data Summary Fall 2014 Survey 53.5% had final rank between E5 to E9 19.4% reported previous use of a payday loan or cash advance service 56.2% accessed storefront by walking Online stores accounted for less than 15% of loans Fall 2015 Survey 59.1% had final rank between E5 to E9 20.9% reported previous use of a payday loan, cash advance service, or title loan 26.3% accessed storefront by walking Online stores accounted for less than 15% of loans Stream, C., Gardner, J.S., & Ralphs, B. (2015). Nevada Veterans Survey. School of Environmental and Public Affairs, University of Nevada, Las Vegas, Las Vegas, Nevada. Gardner, J.S. & Stream, C. (2015, December). Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans. Veterans Policy Leadership Institute. Accessible online: http://vpliresearch.org/unlv sepa studentwins award/ PAPOR Annual Conference, December 2015 Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans 2014 UNLV PUA 727 Survey (Data File) 2015 UNLV PUA 723 Survey (Data File) NOTE: Removed from the presentation, but included in this PDF version for review and reference. 25

Problem and Need: Nevada Veteran Data Summary Fall 2014 Survey 57.5% accessed payday lending since leaving active duty, 49.3% in the past 12 months, and 38.4% reported an existing debt to a payday lender. Fall 2015 Survey 79.0% accessed payday lending since leaving active duty, 39.5% in the past 12 months, and 29.0% reported an existing debt to a payday lender. Stream, C., Gardner, J.S., & Ralphs, B. (2015). Nevada Veterans Survey. School of Environmental and Public Affairs, University of Nevada, Las Vegas, Las Vegas, Nevada. Gardner, J.S. & Stream, C. (2015, December). Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans. Veterans Policy Leadership Institute. Accessible online: http://vpliresearch.org/unlv sepa studentwins award/ PAPOR Annual Conference, December 2015 Exploring the Financial Landscape Facing Veterans in Nevada: Financial Literacy, Decision making, and Payday Loans 2014 UNLV PUA 727 Survey (Data File) 2015 UNLV PUA 723 Survey (Data File) NOTE: Removed from the presentation, but included in this PDF version for review and reference. 26

SB 17 Changes & Policy Implications Statewide database with required fields, tracking, reporting, and licensee fees Creates both industry and borrower accountability Limits the number of potential loans and collects valuable statistical data for continued policy and program recommendations Encourages consumer safe or good faith lending practices to include credit checks, income verification, and capped interest rates and fees (equal to less than 200%) Connects borrowers with available resources and service providers Reduces the gap between current limits and national best practice and policy recommendations from consumer advocates through market based regulations Restricts loans to customers with an existing single advance, single payment (payday or similar) loan and no such loan within the past 45 days. 45 day restriction meets requirement 2 of Pew criteria for Hybrid State Law Type by restricting the total number of potential loans in a calendar year through 45 day restriction (equates to a maximum of 8 loans annually) From a policy perspective, SB 17 begins to address the need for legislation and regulation of the payday lending industry. As seen from the data and analysis presented throughout this presentation, Nevada is from a population dynamic indicative of a target market for such lenders. With lower overall higher educational degree attainment, homeownership rates in addition to higher liquid asset and extreme asset poverty, unbanked, and specifically underbanked residents as compared to the national average. Further considering the geo locational presentation of median income, bank locations, and payday storefronts in Clark County, the impacts of current permissive payday lending regulations are clearly visible. SB 17 provides a significant shift to the current legislation in Nevada by creating a statewide database with required fields, tracking, reporting, and licensee fees. This database creates both industry and borrower accountability, while limiting the number of potential annual loans and collects valuable statistical data for continued policy and program recommendations. Furthermore, SB 17 encourages consumer safe or goodfaith lending practices to include credit checks, income verification, and capped interest rates and fees (equal to less than 200%). In connection with the database, this legislation connects borrowers with available resources and service providers. Additionally, it reduces the gap between current limits and national best practice and policy recommendations from consumer advocates through market based regulations. Finally, by restricting loans to customers with an existing single advance, single payment (payday or similar) loan and no such loan within the past 45 days, SB 17 as proposed meets requirement 2 of Pew criteria 27

for Hybrid State Law Type by restricting the total number of potential loans in a calendar year through 45 day restriction (equates to a maximum of 8 loans annually). SB 17, Nevada 79 th Legislative Session, Revises provisions governing payday lending. (BDR 52 409) The Pew Charitable Trusts, State Payday Loan Regulation and Usage Rates Downloadable Report: http://www.pewtrusts.org/en/multimedia/datavisualizations/2014/~/media/data%20visualizations/interactives/2014/state%20payday%2 0loan%20regulation%20and%20usage%20rates/report/state_payday_loan_regulation_an d_usage_rates.pdf 27

SB 17 Potential Outcomes & Opportunities Offers the potential data driven policy and program design/implementation and evaluation of policies, programs, and statewide financial landscape Increased data in state (most national data is 2 5 years old and is not collected with specificity to short term, small dollar lending at a statewide level) Capacity to connect borrowers to public, private and nonprofit services Regulatory policy with market based, consumer, and state accountability parameters Market based approach could be similar to CO outcomes, less number of lenders without dismantling the industry Improved financial climate that promotes: Promotes and informs financial education programs, Encourages mid and long term income and asset planning, Decreases potential impacts from economic downturns or recessions, and Increases opportunity for financial security and stability. Not only does SB 17 provide a solution for the immediate need for increased legislation in Nevada, it offers the potential for data driven policy and program design/implementation and evaluation of policies, programs, and the statewide financial landscape. Ultimately by increasing available state data (most national data is 2 5 years old and is not collected with specificity to short term, small dollar lending at a statewide level), Nevada is creating what could become a national best practice for payday lending and related legislation/regulations. As previously mentioned, SB 17 also increases connectivity for borrowers to public, private and nonprofit services. From a policy analysis perspective, SB 17 provides regulations with market based, consumer, and state accountability parameters. Comparatively, this legislation could have similar outcomes as observed in CO, where regulations decreased the number of lenders without dismantling the industry and saving consumers $40 million annually in interest and fees. In closing, SB 17 has the potential to improve the financial climate in our state by: a. Promoting and informing financial education programs, b. Encouraging mid and long term income and asset planning, c. Decreasing potential impacts from economic downturns or recessions, and d. Increasing opportunity for financial security and stability. 28

Payday Loan Facts and the CFPB s Impact, The Pew Charitable Trusts, http://www.pewtrusts.org/en/research and analysis/fact sheets/2016/01/payday loanfacts and the cfpbs impact 28

Questions Thank you. For questions about research or testimony, please contact Dr. Justin S. Gardner by email at justin.gardner@innov8reanalysis.com. 29