Payday loans carry an annual interest rate of 391 percent and are so difficult to pay off that many borrowers end up paying more in interest than they originally borrowed, as documented in our report entitled, Financial Quicksand.
Payday lenders renew their loans to the same borrowers many times per year, either by rolling them over for another term, or closing them out and re-opening them. Our report, Springing the Debt Trap, finds that only a two-digit interest rate cap has successfully addressed this loan flipping in the states.