If you haven’t seen it already, the Today Show aired a short segment on the industry highlighting two customer experiences with our product. Finally—a story that offers the perspective of a borrower who said “for me, it works well.” And that’s exactly why products like ours are one of many options to consumers.
There was a bit about credit card cash advances and overdraft being “cheaper” than payday advances. But, are they?
A report by the FDIC concluded that bank and credit union overdraft fees carry APRs ranging from 1,067 to 3,520 percent. In addition, a recent Pew Center study concluded that if an overdraft was treated like a short-term loan with a repayment period of seven days, the APR for a typical incidence would be well over 5,000 percent.
Also, a Federal Reserve Bank of New York staff report, “Price-Increasing Competition: The Curious Case of Overdraft versus Deferred Deposit Credit” finds that that deferred deposit credit, payday loans, and overdraft protection compete directly for market share in the short-term credit market, an $80 billion dollar market. The report found that payday advances are a cheaper alternative to cover small-denominations and “when deferred deposit credit [payday loan] priced per dollar borrowed is available, depositors prone to small overdrafts switch to that option.”
Wonder if the Today Show got their hands on these studies?
Several stories this week have surfaced on this issue, and for a Friday we thought you might want to watch some video coverage. As mentioned in the story, the latest report out of the DFI in Washington shows that, of the licensed entities of which the DFI tracks, consumers paid $122 million dollars less in payday loan fees than they did in 2009. But what we want to know is whether or not these numbers include unregulated entities? Does the DFI accurately portray the full lending picture in Washington?
Such restrictions on payday lending would merely force consumers to use higher cost providers, some of which are unregulated and unlicensed. In the wake of the Washington state restriction, some regulators and legislators said that they have seen an increase in consumers turning to unlicensed and unregulated lenders who may operate beyond the reach of state regulators.
Unlicensed lenders are not accountable to the state either through state examination or compliance standards. DFI’s enforcement chief said that even if the agency can get a subpoena to go after an illegal lender, it’s difficult to get a response and difficult to enforce the subpoena because the lender is either out of state or in another country.[1]
[1] “Hearing on SB 5547,” Committee on Financial Institutions, Housing & Insurance, Washington State Senate, February 16, 2011
Have you taken out a payday loan? Email us! TODAY is looking for people to interview for a future segment on payday loans. If you are interested in being interviewed, please tell us about your loan experience and include your contact information.
If you have a story about your experience in getting a payday loan you want to share, share your story! You can go to the form, fill it out, and be honest about what you experienced with your payday loan.
