Payday lending is a hot-button issue. Consumer Focus released a study saying the number of payday advances borrowed within the United Kingdom has quadrupled within the last four years. In states as diverse as Montana, Arizona, and Ohio, new legislation that limits payday lending has been passed. If the United States senate passes S. 3245, the Payday Financing Limitation Act of 2010, all payday advances can be capped with 36 percent annual interest rates.
Comprehending cash advance data
It could be very difficult to understand the payday lending sector since the data accessible can be inaccurate and conflicting. A recent report by Personal Money Store that compiles more than two dozen studies on the industry discloses that many commonly held beliefs aren’t 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. More than 95 percent of borrowers confirm they understand the finance charges on these loans, while only 20 percent of charge card customers say they’re able to comprehend their charge card agreements, according to a creditcards.com analysis.
The reality of short term credit products
Studies by groups ranging from the Federal Reserve of New York State to our company, 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. Still, one of each five payday cash advances is written off as a default. The profit margin for most payday loan 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.
Making the political debate more substantive
An informed discussion of the political issues around payday lending can be difficult to find. Because payday lending has become a political issue across the country and all over the world, it is very significant to have complete, accurate, and reliable statistics about the industry.
