Payday lending is a hot-button issue. Within the United Kingdom, the number of payday loans taken out in 4 years has quadrupled. Legislation that limits percentage rates and loan terms has been passed in Montana, Ohio, Arizona, and other states. If S. 3245 passes the Senate, the Truth in Financing Act can be extended to cover the rate of interest of payday cash advances.
Trying to understand payday financing data
Understanding the payday loan industry and its customers is complicated by ubiquitous inaccurate and conflicting data. A recent report by Personal Money Store that compiles more than two dozen studies on the market reveals that many commonly held beliefs aren’t supported by the numbers. Most customers of short-term financing goods have worked at the exact same job for four years or more. According to an analysis by creditcards.com, only 20 percent of charge card customers really comprehend their charge card agreements. In comparison, 95 percent of payday advance customers understand the charges they’re paying.
The figures behind short term credit
Over 20 percent of applications at brick and mortar cash advance stores are rejected. Up to 99 percent of online payday advance applications are rejected. Still, one of each five payday loans is written off as a default. 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.
Placing numbers on the perceptions
A careful and informed discussion of the issues surrounding short-term credit and payday lending has been lacking. Because payday financing has become a political issue across the country and worldwide, it is very essential to have complete, accurate, and reliable data about the industry.
