Predatory payday lending practices cost American families
$4.2 billion annually.
Payday lending (sometimes called cash advance) is the practice of using a post-dated check or electronic checking account information as collateral for a short-term loan.
36% cap springs the trap
CRL report, “Springing the Debt Trap,” finds that measures short of an interest rate cap fail to slow the cycle of debt that catches borrowers in repeat payday loans. |
To qualify, borrowers need only personal identification, a checking account, and an income from a job or government benefits, like Social Security or disability payments.
Research shows that the payday lending business model is designed to keep borrowers in debt, not to provide one-time assistance during a time of financial need. According to CRL's research, borrowers who receive five or more loans a year account for 90 percent of the lenders’ business. Our report, Financial Quicksand, shows that payday lenders cost American families $4.2 billion every year in predatory fees. Twelve states and the District of Columbia will save a collective $1.5 billion per year with an effective solution -- a cap on interest rates for consumer loans in the 36-percent range.
To learn more about predatory payday lending, explore our starter toolkit.
Briefs & Factsheets
CRL Critique of “Payday Holiday: How Households Fare After Payday Credit Bans”
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Reports & Papers
Financial Quicksand
Across the nation, payday borrowers are paying more in interest, at annual rates of 400 percent, than the amount of the loan they originally borrowed. More >
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Policy Recommendations
36% Cap Springs the Trap
Report confirms that measures short of an interest rate cap fail to slow the cycle of debt that catches borrowers in repeat payday loans. More >
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