News : Financial Readiness

CFPB releases payday lending report

Tuesday, March 25, 2014  
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CFPB releases payday lending report

  • Four out of five payday loans are rolled over or renewed within two weeks, and the majority of payday borrowers end up paying more in fees than the amount they originally borrowed,
  • A primary driver of the cost of a payday loan is consumer may roll over the loans shortly after borrowing. Even in states that have "cooling-off" periods restricting a borrower from taking out another payday loan, the report found that as soon as the period ends, consumers renew the loans at the same rate as borrowers in states that don’t have any limitations.

·         Three out of five payday loans are made to borrowers whose fees exceed the amount borrowed.

·         Four out of five borrowers who renew their loans end up borrowing the same amount or more.  As the number of rollovers increases, so does the percentage of borrowers who increase their borrowing.

·         For 48 percent of all new payday loans, borrowers are able to pay back the full amount with no more than one renewal. But for 22 percent of loans, borrowers renew the loans six times or more.

The report is based on data from a 12-month period.

 

Here's the full report:  http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf



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