Payday Lending Battles in USA
Wherever you live and report, there’s a good chance a payday lending battle is brewing in your backyard.
An estimated 12 million Americans spend $7.4 billion a year on payday lending services, according to the latest report from the Pew Center on the States. That breaks down to 5.5 percent of adults across the country. These borrowers are mostly white females between ages 25 and 44. They borrow an average of $375 to cover regularly occurring bills and pay an estimated $520 in interest charges.
“This is a system set up to bilk the borrower,” said David Heath, an investigative reporter for the Center for Public Integrity in Washington, D.C. Heath has spent the past few years investigating online payday lending. He’s written about Indian-owned payday lenders in Colorado, Oklahoma and Kansas and unearthed one wealthy race car driver funding his adventures with the proceeds of his highly lucrative and secretive payday lending business.
“It’s such an easy business to get into, particularly as the economy has created cash flow problems for so many people,” Heath said.
As the economy worsened, the ranks of payday lenders grew. Allegations of abusive practices increased and companies have increasingly altered their business models to keep up with changing regulations. Some big banks are also getting into the business. It’s a situation that makes for an endless stream of story ideas for business reporters looking to find local angles to a major story playing out across the U.S.
The Pew Center has amassed a vast collection of data reporters can use to help identify trends, better understand this growing industry and spark ideas. It surveyed more than 33,000 people to derive its data and created an interactive map of state payday lending regulation and usage rates.
Pew’s Safe Small-Dollar Loans Research Project classified states into three categories—Permissive, Hybrid, and Restrictive—based on their payday loan regulations. Nationally, the average usage rate for payday loans is 5.5 percent, but usage by state varies from 1 percent to 13 percent. Usage rates also vary by law type and are 6.6 percent in Permissive states, 6.3 percent in Hybrid states, and 2.9 percent in Restrictive states. The rate of online and other non-storefront borrowing does not vary significantly by state law type, but storefront borrowing is far lower in Restrictive states than in Permissive or Hybrid states. Roll over the map to see each state’s usage rate, and click individual states to read a summary of their payday lending laws.
National consumer protection organizations, such as the Consumer Federation of America and the Center for Responsible Lending, also track the topic closely and talk about it extensively as do groups such as the Community Financial Services Association of America, a lobbying association for payday lenders.
National data on payday loans is ample, but the most interesting stories still are playing out not in the nation’s capital but in the cities and and states across the country.
See more of this article from businessjournalism.org here.