The payday loan industry is one of America's fastest growing yet most depressing businesses today, because it is bombarded with criticisms, calling Payday loan providers loan sharks.
However, these so called short-term, high interest loans, to millions of American families, are part of their everyday life. In fact, last year, in 2006, as revealed by industry statistics, weeks before Christmas, nearly 9 million Americans applied for and obtained a payday loan.
According to CFSA (The Community Financial Services Association of America), trade group for responsible payday lenders, state regulated payday loans are often the best option there is for borrowers looking for fast, short term and no credit check kind of credit.
While critics of payday loans claims payday loan borrowers pay nearly $4.3 billion in fees per year, they fail to note that payday loan borrowers get nearly $40 billion credit for those fees. This can be well explained by the information below:
1.In 2006, consumers pay about $4 billion towards ATM service fees just to withdraw money, which in the first place, belongs to them.
2.Banks collect nearly $10 billion a year towards overdraft protection charges and services.
3.In 2005, credit card providers have collected more than $11 billion in late fee charges.
4.Consumers, in 2000, paid about $87 billion in credit card interests.
Furthermore, CFSA revealed that "rollovers are limited by CFSA member companies and by law in 37 states. Our industry continues to operate profitably in states where rollovers are not allowed because more than 90 percent of payday loans are repaid when due."
The payday loan industry is flourishing mainly because low waged, service sector workers are growing massively. And these people, who are often in need of fast cash without credit ratings have turned to payday loan providers as an alternative to traditional bank loans. And this is very rational - take a closer look at all other options:
(1) For a $100 Payday loan amount, you pay $8-$10
(2) For a $100 Credit Card Bill, late fee charge is $37.00
(3) 100 dollars Overdraft Protection, pay $26.90
(4) For $100 issued check, pay $54.04 for bouncing check fees
