Payday Loan Providers' Response to Criticisms

The payday loan industry is one of America’s fastest growing businesses, yet it is bombarded with criticisms.

However, the short-term, high interest payday loans, are to millions of American families, part of their everyday life. Industry statistics show that in the weeks before Christmas 2006 nearly 9 million people applied for a payday loan.

So despite the critics, it is a fact that State-regulated payday loans are often the best option for fast, short term finance, often available with no credit check.

Payday loan critics note that borrowers pay over $4 billion in fees every year, but on the other hand this represents around $40 billion in credit granted.

By contrast in 2006, consumers paid about $4 billion in ATM service fees just to withdraw their own money!

Moreover, banks collect nearly $10 billion a year from overdraft protection charges and services, and in 2005, credit card providers collected more than $11 billion in late fee charges.

Rollovers
Another frequent criticism of the payday loan industry is that automatic and continuing rollover of loans creates dependency and hardship amongst consumers who can least afford it. This of course is a valid criticism, and the very reason why codes of conduct and State laws have developed to protect the vulnerable.

The CSFA is on record as saying that "rollovers are limited by CFSA member companies and by law in 37 states. Our industry continues to operate profitably in states where rollovers are not allowed because more than 90 percent of payday loans are repaid when due."

The payday loan industry is successful because lower income people, who are need of fast cash can get support from payday loan providers without the credit score required by traditional banks.