Get to Know: The Consumer Need:
Payday advance fills a need not met by traditional financial institutions
It’s a convenient, less costly, and often more desirable option for short-term, unsecured credit.
Get to Know: Market Alternatives
Bounced check and overdraft protection fees
Consumers pay an estimated $22 billion in NSF fees to banks and credit unions. Banks also collect an estimated $10.3 billion annually for overdraft protection services.
PDF: Contrasting Payday Loans to Bounced Check Fees, Consumer Credit Research Foundation, Thomas E. Lehman, Ph. D., 2005. Overdraft Fees Can Overwhelm, Washington Post, June 26, 2005.
Late payment penalties (landlords, utility companies, credit card companies, etc.)
An estimated $57 billion in late bill payment fees were collected by businesses in 2003, more than 140 percent of the total estimated payday lending volume in the United States. Credit card late fee penalties totaled over $11 billion in 2005.
Sizing NSF-Related Fees, BAI Banking Strategies Magazine, Bill Stoneman, January-February, 2005 (CreditCards.com, 2006)
Internet Payday Lending
With a growing but unmeasured market size, Internet payday lending is an “explosive” market that is creating increasing problems for state regulators and enforcement officials, says Bankrate.com (Online Payday Loans: Borrower Beware, September 12, 2005). Unregulated off-shore lenders have access to consumers’ bank accounts and charge up to $30 per $100 borrowed.
Get to Know: The Impact of Elimination
Removing the choice of regulated storefront payday lending—the smallest segment of the market—will only force consumers to more expensive, less desirable and unregulated alternatives.