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Payday Lenders Set Borrowers Up for Failure
10 Jul 2009 by Jeremy in Home Page, Issues, News, State Issues / No Comments
REPORT: ‘Phantom Demand’ lays bare the deceptionA new report by the Center for Responsible Lending shows the payday loan industry creates demand for its own services by setting loan terms that encourage rapid re-borrowing by consumers:
Payday churning – repeat borrowing of what payday lenders market as a short-term loan of a few hundred dollars – has been well documented. But the Center for Responsible lending’s new report goes further by verifying for the first time how quickly most payday customers must turn around and re-borrow after repaying a previous payday loan. Among the over 80 percent of payday borrowers who conduct multiple transactions in a year:
- Half of repeat loans are opened at the borrower’s first opportunity, immediately or after a 24-hour waiting period, depending on state rules.
- 87% of repeat loans are opened within two weeks, or generally before their next payday.
- Only 6 percent of subsequent payday loans are taken out longer than a month after a previous loan was paid off.
Watch a video from the CRL press release and read the full report at their web site.
- Half of repeat loans are opened at the borrower’s first opportunity, immediately or after a 24-hour waiting period, depending on state rules.
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