Politicians have been batting around the issue of payday lending. Consumer Focus released a study saying the number of payday advances borrowed in the United Kingdom has quadrupled in the last four years. Montana, Arizona, and many other states have taken steps to limit payday lending. Cash advance interest would be capped at 36 percent or higher interest, if S. 3245 passes the US Senate.
Trying to understand payday financing statistics
It can be very difficult to comprehend the payday lending market because the data available can be inaccurate and conflicting. Many things that are said to be true of payday advances just simply do not appear to be the case, according to a recent report by Personal Money Store. Most payday loan or short-term credit customers make over $ 47,000 in a year and have been working at one job for four years or more. More than 95 percent of borrowers confirm they understand the finance charges on these loans, while only 20 percent of credit card customers say they are able to comprehend their credit card agreements, according to a creditcards.com analysis.
The statistics of payday lending and short term credit
Studies by groups ranging from the Federal Reserve of New York State to our business, Personal Money Store, found that 11 percent to 20 percent of applications in brick-and-mortar stores and up to 99 percent of online applications are rejected. Over 20 percent of short-term loans, even with these high standards, have to be entirely written off as a total loss. The profit margin for most payday lenders is between 8 percent and 10 percent, compared to the 12 percent profit of J.P. Morgan and 27 percent profit Goldman Sachs reported to the Securities and Exchange Commission in April.
Trying to advise the discussion
A careful and informed discussion of the issues surrounding short-term credit and payday lending has been lacking. With pending legislation within the Senate, 15 states that ban payday lending altogether and several states considering limitations, accurate statistics are vital.
