A report released in January of 2023 attempts to provide cover for the predatory practices of payday lenders, who charge average 400% annual interest on loans that routinely create a long-term cycle of debt that sends borrowers into deep financial insecurity.

The Consumer Financial Protection Bureau (CFPB) found that 75% of payday lender fees are collected from borrowers with 10 or more loans per year, indicating the reliance of payday lenders on a business model of long-term debt.

Eighteen states and D.C. have stopped this debt trap by implementing a rate cap of 36% or less, including fees. Illinois passed such a cap in 2021. This has prompted supporters of payday lending to take aim at the new law, making the unsubstantiated claim that consumers will suffer if triple-digit interest loans are not available in their states.

But an analysis by CRL of the structure and methodology of research cited by supporters of payday lending found multiple flaws that raise questions about the objectivity and validity of the conclusions presented in the report. *


* Despite the fact that one of this paper’s authors is a member of the Federal Reserve's Board of Governors, the deeply flawed report is not a product of the Federal Reserve Board, as acknowledged by the authors.