Americans Paying Dearly for Payday Loans
The study says that one-quarter of payday loan consumers sealed the deal online, with three-quarters of consumers using traditional storefront payday loan operations. That number could conceivably drop as more states outlaw storefront payday loan shops. However, Pew reports that in states that have banned storefront lenders, there is no big increase in online payday loans (suggesting, perhaps, that out of sight really is out of mind).
Still, when almost seven of 10 payday loans users are taking the cash to pay bills or buy food, instead of using the money for emergencies, that's a big problem. The solution doesn't lie in more payday loans, although increasingly, that's the direction consumers are going in.
"These findings raise serious concerns about payday lending, including whether a two-week product with an APR typically around 400 percent is a viable solution for people dealing with a chronic cash shortage," the Pew study says.
12 million consumers -- about 5.5% of U.S. adults -- already know whether it's a solution to their problems, but they're taking payday loans, anyway.
--By Brian O'Connell
More on payday loans:
Cracking down on payday loans
Avoiding the payday lending debt trap
New York payday lenders pay