Innovations in the financial services industry have produced a variety of products to meet the demand for short-term credit in the United States including deferred deposit credit, payday loans, and overdraft protection (ODP). Payday or salary advances are a popular option for consumers because they are often more economical than products provided by bank, credit unions, and credit card companies. For example, bank and credit card non-sufficient funds and overdraft protection fees are a more expensive form of credit to most Americans. In addition, frequent use of overdraft can adversely affect a consumer’s credit rating.
There has been some effort to encourage banks to offer customers small-dollar loans comparable to payday loans, most notably a Federal Deposit Insurance Corporation (FDIC) Small Loan Pilot Program launched in 2008. Evidence from the report shows that banks cannot compete with the cost and ease of payday loans. Further, banks do not see small-dollar loans as a profitable endeavor and given the few that participated in the program, it is unlikely that short-term loans will become a significant portion of their product portfolio.
Consumers Prefer Payday Loans to Cover Small-Dollar Expenses
Credit Unions Cannot Meet Payday Loan Customers’ Needs
Households with Access to Payday Loans Fared Better in the Face of Rising ODP and NSF Fees in 2009
FDIC Small Loan Program Shows Banks Can’t Compete with Payday Loans
Managing household finances can be a daunting task. However, by using solid budgeting and savings techniques, you can accomplish major financial goals. In the Customer Resource Center, CFSA offers a variety of payday advance resources that support and encourage responsible lending practices, and highlight the vital role of our members’ stores in neighborhoods near you.
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Here you will find an aggregate of industry research, comprehensive data, and benchmarking tools from the short-term lending industry. They cover all payday advance business areas – consumer demographics, media hits, the latest policy initiatives, among others. Click here to access to the partner's resource library.
CFSA works at the federal, state, and local levels educate legislators and regulators about the role of payday advances in the broader financial services arena. This section provides resources for policymakers who believe in access to credit, want to preserve financial options and ensure balanced, substantive consumer protections. Click here to enter the Policymaker Resource Library.