Politicians have been batting around the issue of payday lending. Consumer Focus released a study saying the number of pay day loans borrowed in the United Kingdom has quadrupled in the last four years. Legislation that limits percentage rates and loan terms has been passed in Montana, Ohio, Arizona, and other states. If the United States senate passes S. 3245, the Payday Financing Limitation Act of 2010, all pay day loans could be capped with 36 percent annual interest rates.
Trying to understand payday financing statistics
Consistently inaccurate or conflicting information makes comprehending the payday financing business more difficult. Many things that are said to be true of pay day loans just simply don’t appear to be the case, according to a recent record by Personal Money Store. Most payday advance or short-term credit customers make over $ 47,000 in a year and have been working at one job for four years or more. According to an analysis by creditcards.com, only 20 percent of charge card customers actually understand their credit card agreements. In comparison, 95 percent of cash advance customers understand the charges they are paying.
The figures behind short term credit
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. Over 20 percent of short-term loans, even with these high standards, have to be entirely written off as a total loss. 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.
Making the political discussion more substantive
An informed discussion of the political issues around payday lending could be difficult to discover. Accurate statistics are incredibly vital, because legislation in the senate is pending.
