Phantom Demand – New Report from Center for Responsible Lending

10 07 2009

Phantom Demand

A new CRL report released today finds that payday lenders create demand for their 400% interest loans by setting loan terms that generate rapid re-borrowing. Download the complete report  (PDF, 31 pp.) Download the executive summary (PDF 4 pp.)

Watch our video press release. 

A full three quarters of payday lending loan volume is generated by churned loans from borrowers who take another loan before their next payday.

Phantom Demand documents for the first time how quickly most payday lending customers must turn around and re-borrow after paying off what was supposed to be short-term debt. Among the over 80 percent of borrowers who conduct multiple transactions:

  • Half of new loans are opened as soon as possible.
  • 87% of new loans are opened within two weeks.
  • Only 6 percent of subsequent payday loans are taken out longer than a month after the previous loan was paid off.

The national payday lending industry originates $27 billion in loans per year. These 59 million churned loans account for $20 billion of that volume.

Americans pay $3.5 billion  every year in fees for churned loans, money that could go for essential needs, savings, or to pay off other debt.

CRL supports a 36% cap on annual interest rate to reform high-cost lending practices like payday lending. Tell your members of Congress to support federal proposals to cap annual interest rates at 36%.


About the Center for Responsible Lending
The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation’s largest community development lenders.

Copyright 2009 Center for Responsible Lending. All Rights Reserved.




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