Payday lending is a hot-button issue. Consumer Focus released a study saying the number of payday loans borrowed within the United Kingdom has quadrupled in the last four years. Montana’s I-164 initiative seeks to limit payday lending, and Arizona’s “Operation Sunset” ended all payday lending within the state on June 30. Cash advance interest would be capped at 36 percent or higher interest, if S. 3245 passes the US Senate.
What the numbers guiding payday loans suggest
Consistently inaccurate or conflicting information makes comprehending the payday lending sector more difficult. A recent report by Personal Money Store that compiles more than two dozen studies on the business reveals that many commonly held beliefs are not supported by the numbers. For example, the average cash advance consumer makes $ 47,260 per year and has been working for the same employer at least four years. Over 90 percent of customers who take out payday loans say they comprehend the charges they’re paying. At the same time, only about one-fifth of credit card customers comprehend their charges, according to a record by creditcards.com.
The truth of short term credit goods
There is a belief that all payday loan applications are approved — however studies have shown that up to 20 percent of applications are rejected. Over 20 percent of short-term loans, even with these high standards, have to be totally written off as a total loss. Most payday lenders report 8 to 10 percent profit. In comparison, Goldman Sachs reported 27 percent profit.
Educating the political debate
An informed discussion of the political issues around payday lending can be difficult to find. With pending legislation in the Senate, 15 states that ban payday lending altogether and several states considering limitations, accurate data are vital.
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