Two-Week Loan is a Lie
– Payday lenders distort the facts about their products,
claiming they are short-term loans for emergency use.
the payday industry trade association announced a $10 million public relations campaign. The new ads tell borrowers
that payday loans are one-time loans
short-term expenses. The trade association website states: “Did you know that payday loans are two-week loans —
not annual loans! The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for
a two-week duration.”
reality 99% of payday loans are converted
into long-term debt.
Only one percent of payday loans
go to borrowers with only one transaction per year. On average, 90% of payday loans go to borrowers with five
or more per year. 62% of loans go to borrowers with 12 or more per year. (Financial Quicksand: Payday Lending Sinks Borrowers
in Debt with $4.2 Billion in Predatory Fees Every Year, Center for Responsible Lending, Nov. 30, 2006)
lenders charge interest rates upwards of 400%.
Payday lenders tell their customers their fees are
$15 per hundred borrowed, or thereabouts. Because these loans average two weeks, the annual interest is near 400%.
And because these loans are repeatedly renewed, rolled over, or closed out and immediately reopened, payday loans are long-term
debt – annual interest rates are an accurate measure of their cost and, even for the rare short-term borrower, an accurate
means of comparing the cost of credit.
that cap annual interest in the 36-percent range eliminate payday loan flipping.
like North Carolina (36% cap) and Pennsylvania (26% cap) cap annual interest rates for consumer loans in the double digits.
Since the practice of payday loan companies partnering with out-of-state banks to operate in states where payday lending is
illegal has been stamped out, these states have rid themselves of predatory payday lending.