http://www.justinepetersen.org/Center for Responsible Lending NewsBrief
CRL refutes absurd claim that 400 percent interest payday loans prevent overdraft bank fees
A loan that is designed to trap borrowers in debt for weeks, months, even years on end cannot possibly keep families afloat as they work to pay their bills and keep their finances in order.
But the payday industry continues to insist that it does just that, as justification for the 400 percent annual interest rates they have managed to keep legal in a shrinking—but still large— number of states.
A new brief released by the Center for Responsible Lending explores this issue, revealing the argument for what it is, the industry's latest attempt to protect a predatory product that traps working people in 400 percent interest debt at a cost of over $4 billion per year.
Banks and credit unions charge working families billions of dollars every year in unfair overdraft fees. Payday lenders claim that their loans help prevent those fees, but the opposite is actually true.
Payday loans are more likely to cause additional overdraft fees, making it even more difficult for families who take out payday loans to recover from a financial shortfall.
Research from industry analyst Bretton Woods finds that contrary to industry claims, a recent report finds no evidence of increased overdraft and insufficient funds fees where payday loans are not available.
In fact, a Harvard Business School study found that payday lending actually increases the odds that households will repeatedly overdraft—and ultimately lose their checking accounts.
Learn more about payday lending.
A loan that is designed to trap borrowers in debt for weeks, months, even years on end cannot possibly keep families afloat as they work to pay their bills and keep their finances in order.
But the payday industry continues to insist that it does just that, as justification for the 400 percent annual interest rates they have managed to keep legal in a shrinking—but still large— number of states.
A new brief released by the Center for Responsible Lending explores this issue, revealing the argument for what it is, the industry's latest attempt to protect a predatory product that traps working people in 400 percent interest debt at a cost of over $4 billion per year.
Banks and credit unions charge working families billions of dollars every year in unfair overdraft fees. Payday lenders claim that their loans help prevent those fees, but the opposite is actually true.
Payday loans are more likely to cause additional overdraft fees, making it even more difficult for families who take out payday loans to recover from a financial shortfall.
Research from industry analyst Bretton Woods finds that contrary to industry claims, a recent report finds no evidence of increased overdraft and insufficient funds fees where payday loans are not available.
In fact, a Harvard Business School study found that payday lending actually increases the odds that households will repeatedly overdraft—and ultimately lose their checking accounts.
Learn more about payday lending.
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