July 10, 2009
Payday Lenders Set Borrowers Up for Failure
REPORT: ‘Phantom Demand’ lays bare the deception
A 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.