|This is the talk page for discussing improvements to the Payday loan article.|
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This section reads like it belongs in a discussion of Payday Loans in the United States of America, not in a global discussion of these loans — Preceding unsigned comment added by 220.127.116.11 (talk) 07:04, 28 May 2013 (UTC)
I am unaware of any large scale non-U.S. studies of the payday industry. I have added some demographic data provided by the FDIC study of unbanked households. This is a bi-annual survey of 45,000 American households about banking and the use of payday lenders. Editengine (talk) 02:48, 26 August 2014 (UTC)
Useful pro-payday lending source
This article is by Jonathan Zinman, published by the Philadelphia Fed, on an industry-funded study done by Zinman.
Here's the colophon:
- Thanks to Consumer Credit Research Foundation (CCRF) for providing household survey data. CCRF is a non-profit organization, funded by payday lenders, with the mission of funding objective research. CCRF did not exercise any editorial control over this paper. The views expressed here are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. --Pnm (talk) 01:07, 10 June 2010 (UTC)
There really aren't a lot of good sources which could be called "pro" payday. However, Neil Bhutta at the FRB has found null or very small negative effects on bankruptcy and credit score using a large sample of data from payday lenders. However, as other have noted when discussing Bhutta's work, these are questionable methods of documenting impact. Credit scores for most payday borrowers were already so low they really couldn't fall much more, and bankruptcy is actually a positive step to repair one's credit and it requires a substantial investment of time and money, something many payday borrowers don't have. Editengine (talk) 01:17, 26 August 2014 (UTC)
This page will almost definitely be used for spammers to try to rank their websites, as payday loans is a profitable topic to use for lead generation. Be extra careful to make sure external links on this page are relevant. 18.104.22.168 (talk) 11:15, 20 April 2014 (UTC)
- Since no one's responded, I'll be taking a big knife to this section shortly. --Nuujinn (talk) 16:56, 7 September 2010 (UTC)
- Lisa Bachelor, "You can settle the loan on payday - but the APR could be more than 2,000 per cent", The Observer, June 29, 2008
- Jennifer Brown, "Payday-loan legislation faces a fight", Denver Post, February 19, 2008
- "Payday lenders: Beating back rate caps in Richmond", January 31, 2008
- Brennan Clarke, "Loan rangers", BCBusiness, January 1, 2008
- "Payday lenders craft user protections", USAToday, February 22, 2007
- "This Opinion Brought To You By..." Criticism of Tom Lehman's article on Payday Lending and Public Policy, Business Week, January 30, 2006
- "America's growing fringe economy: Financial services for the poor and credit-challenged are big business", Dollars & Sense magazine, November/December 2006
- "How the other half banks: The depressing, amazing 'payday loan' business", Slate.com, May 10, 2004
- In debt we trust Documentary about banking practices, including payday loans
- Barry Yeoman, "Sudden Debt", AARP magazine
- The Toledo Blade: Local payday lenders cash in on rising short-term needs
- Broke, USA: From Pawnshops to Poverty, How the Working Poor Became Big Business - video report by Democracy Now!
- FDIC Guidelines on Payday Lending
- "The Cost of Payday Loans", the Financial Consumer Agency of Canada
- Supreme Court of the United States. Marquette National Bank of Minneapolis v. First of Omaha Service Corp. et al., 439 U.S. 299 (1978), Findlaw.com
- "Predatory lending and the military: The law and geography of "payday" loans in military towns", March 2005
- "Defining and Detecting Payday Lending", Federal Reserve Bank of New York
- "Payday Lending: Do Outrageous Prices Necessarily Mean Outrageous Profits?", Fordham Journal of Corporate & Financial Law
- Veritec Solutions white paper, August 2007
- "Payday lending companies fill consumer demand", Truman State University
- "Payday Lenders: Heroes or Villains?", Adair Morse
- "Payday Holiday: How Households Fare after Payday Credit Bans", Donald P. Morgan and Michael R. Strain
- "An Experimental Analysis of the Demand for Payday Loans", Bart J. Wilson, David W. Findlay, James W. Meehan Jr., Charissa P. Wellford, and Karl Schurter.
- "Payday lending: Serving the unbanked", Mises.org, February 10, 2004
- "Banks Shift from Overdraft Fees to Payday Loan Type Products", February 25, 2010
- Community Financial Services Association of America, US payday loan industry trade organization
- Consumers Union Fact Sheet, Consumers Union
- Payday loan site of the Consumer Federation of America, a consumer advocacy organization
- Utah Consumer Lending Association, Local trade organization representing cash advance lenders
- Virginians Against Payday Loans An alliance of businesses, consumer advocates, and faith-based groups
Truth vs. Fiction
BIlby, In regards to recent edits:
I have extensive experience in credit, though neither an advocate nor opponent of payday lending.
In practice, consumers do not use APR. They use flat fee pricing to determine credit usage. I cited an article to provide substantiation, but a visit to your local store will verify. Nobody asks what the APR is on a short term loan.
There is not a single state statute that authorizes any lender to add additional fees or increased interest rates if they fail to pay. If they fail to pay, the loan is booked as a default and the consumer sent to collections. Some states do permit "rollovers" or "renewals", which are generally limited in number by state statute or trade association authority. Renewals are the same as refinancing -- the principal remains out, another fee is charged.
The Pew Study is highly problematic and not a viable source for citation. It's methodology consisted of taking 451 surveys out of a body of 12 million users. It's been critiqued here: http://www.bloggernews.net/128954
The analysis regarding asset depletion is not complete without the logical extension that the haworthpress article begins. The sentence you repeatedly delete is true. A consumer pays for an extension of credit, that credit is expended into the community. The consumer repays that credit. The community thus sees a net increase -- from consumer to community -- in assets. The consumer initially sees a net decrease equal to the amount of the credit plus the fee paid for it. However, the consumer receives goods or services in exchange for that credit, thus creating no change in his or her asset base. They are out the fee paid for the credit, however a fee of some kind would be expended in any event, because credit was needed.
- You've removed criticism of payday loans, and replaced it with positive spin. This makes me more than a little nervous, especially as I was led to believe that the previous editor who made identical changes was doing so with a conflict of interest. I've asked for assistance from the relevant WikiProject, where hopefully we can get some expert input into the article.
- At any rate, a critique of the Pew study by a blogger seems insufficient to warrant its removal, and other content you removed was well sourced. - Bilby (talk) 10:22, 30 April 2013 (UTC)
Just a moment. You're exhibiting your own bias. Removing criticism of payday loans? Why is criticism somehow the default for what is accurate and true? You refuse to allow that positive aspects of payday loans may in fact be the true and accurate position. Any potential conflict of interest is furthermore irrelevant IF WHAT IS PROVIDED IS ACCURATE. I myself have been in the credit industry for ten years. Why is my expertise regarded as bias rather than for what it is -- expertise? THIS IS EXPERT INPUT.
Furthermore, sourcing an entity such as Pew or the Center for Responsible Lending -- which are openly biased against payday lending -- should not be afforded any reliability. At the very least, a blog that provides substantive analysis challenging Pew's assertions should be viewed as an equally credible source -- even more so than Pew. Again, why is the default for what is considered accurate something that is negative about payday loans, from sources patently biased?
My proposal is that BOTH positions be provided. You cite Pew. I'll cite the blog critical of it. Let readers do their own further research and decide for themselves.
I have added a few new sources and data, trying to keep to large scale studies from the CFPB (12 million loan records collected from payday lenders), the FDIC (45,000 survey responses in their biannual report), and the FRB (about 42,000 individuals matched in a crosswalk dataset). In the interest of fairness I will add the findings of Victor Stango at CATO institute, although his study is based upon the survey of 40 payday consumers from a table in the lobby of a payday storefront location.
Regarding the use of APR, law typically requires the disclosure of the APR and while consumers may not ask for it that isn't unusual for unsophisticated borrowers. However, since we know now that 80% of borrowers will roll over the loan, and the borrowers is in debt for a median period of 199 days, it is appropriate to measure the cost of credit in these terms.
The comment on the Pew study is incorrect. I can't read the blog critique because the link is out of date, but the random sampling seems to have produced a decent size with a 4% margin of error.
There are a lot of very old reports cited here, many of which have been corrected as newer data became available post Dodd-Frank. If there are no objections I would like to correct some of them. Editengine (talk) 03:35, 26 August 2014 (UTC)
Totally incorrect interest calculation
In the header it states: "For a $15 charge on a $100 2-week payday loan, the annual percentage rate is 26 × 15% = 390%;". This is totally incorrect, as anybody who has done basic maths at school should know. Interest is compounded.
£/€/$15 on £/€/$100 over 2 weeks is ratio of 115/100 = 1.15. Over a year (26 x 2 weeks) this is ratio of (1.15)26 = 37.856, or 3686% (rounded). I am "being bold" and correcting this. TiffaF (talk) 11:45, 25 July 2013 (UTC)
As somebody noted in the footnotes, this comment assumes that the payday loan is processed as if it is a traditional closed end loan, where interest in charged as part of a periodic payment. Payday lenders require a cash payment upfront, analogous to a downpayment in some ways, and the fee does not compound as this comment suggests. The 390% figure here is in fact accurate. Editengine (talk)