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Payday
Loan and Cash Advance Industry Facts
About the payday loan and cash advance
industry
At 2005 yearend,
analysts estimated that there were between 23,000 and 25,000 payday loan outlets in the
United States conducting $40 billion in loans, with $6 billion in loan
fees paid by consumers. Payday lending has grown very fast over
the last few years. In 2000, the industry consisted of 7,000 - 10,000
payday loan offices, accounting for 41 million transactions and $1.4
billion in fee revenue. By 2003 yearend, there were about 22,000 payday
offices generating $6 billion in fees, and around 100 million
transactions. Total sales grew from $10 billion in 2000 to $40 billion
in 2003. In short, the payday lending industry quadrupled in size within
three years.
The tremendous growth
in the payday industry has been fueled by extremely high profits: an
estimated 34% pre-tax return. Payday lenders only need a small amount of
cash to make profitable loans. After the first loan, the borrower is
simply re-borrowing the money they just repaid, minus the service fee.
Lenders charge annual interest rates of 400% or more. In comparison, the
highest credit card rates rarely exceed 29% APR -- less than one-tenth
the APR charged on a payday loan.
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