With rising gas and grocery prices, interest rates increasing, and other significant economic challenges, many Americans are finding themselves in need of short term financial assistance to pay for even the basics. Unfortunately, many short-term options such as payday loans, come with incredibly high lending costs, which can result in struggling workers and families finding themselves further behind.
The Center for Responsible Lending (CRL) and its Julian Bond Institute (JBI) today released new research, “The Cost of Payday Loan Apps in Your State,” with state-specific data demonstrating very high costs and rates of reborrowing. CRL illustrates this information through an interactive map as well as factsheets for all 50 states, DC, and nationwide.
“Our state-by-state data show that payday loan apps charge triple-digit interest rates and rely on people taking out dozens of loans a year to generate most of their fees,” said Christelle Bamona, senior researcher at CRL and co-author of the analysis. “This business model should concern policymakers. To protect consumers, strong interest rate caps must be applied to these predatory loans.”
CRL’s analysis was based on a large, anonymized dataset showing bank account transactions for nearly 347,000 borrowers of payday loan apps (which are often marketed as “Earned Wage Advances”).
Based on a nationwide sample of these borrowers, CRL found the following about direct-to-consumer payday loan apps:
- The annual percentage rate (APR) of the average loan is 232%
- 96% of loans had fees, including fees disguised as “tips”
- 82% of fees were extracted from people with 25+ loans a year
The analysis also found the following about all payday loan app advances (those from employer-based and from direct-to-consumer lenders):
- 42% of loans were smaller than $100
- On average, borrowers took out 33 loans a year
Sign in to get access to this free resource, and all of our whitepapers and reports.
Download this content today!
Register Now Already registered? Click here to Log In
Tags: apr, interest rates, loans, money, payday loans, Payroll, short term loans, usury
