To talk about how payday loan companies are doing today, and what the payday loan landscape looks like, we need to go back to the beginning of the pandemic. Many people thought the payday loan industry would go through another huge spurt of growth, given that so many were either out of work or couldn’t work.
It just didn’t happen that way. There was one thing that wasn’t figured into this equation. Free government money! Nobody thought for a moment checks for a minimum of $1,200 would go out twice. And keep in mind the unemployment checks were going out on a regular basis too.
During the worst part of the pandemic almost all the states made it easier for most households to obtain loans that were more conventional, and cost much less than the old-fashioned payday loan. In addition, the Small Business Administration started their paycheck protection program and helped many businesses stay afloat. This in turn changed the way payday loan companies were thinking. They didn’t get the big jump in business they thought they would. In addition, with Federal relief and child tax credits being available, much of the need for taking out high interest payday loans was removed. Furthermore, there were more defaults on payday loans than usual. Payday loan defaults were up 17% in 2020.
Given payday loans are already a risky proposition for the lender, the17% default rate put another monkey wrench into the payday loan machine. Of course, payday loan providers were still making money and lots of it. Many payday loans carry an average APR of 400 to 500%. With fees tacked onto the interest rates payday loan lenders were not hurting and as a matter of fact more than likely never felt the 17% loss of revenue which resulted directly from lockdowns and closed businesses. Payday loans are illegal in 18 states. 32 states still allow access.
But even those numbers are skewed. Throughout the years, many payday loan companies have partnered up with native American tribes and are hiding behind the curtain of sovereign, indigenous people’s land. Internet advertising is a doorway into States that have outlawed payday lending. Once the door is open payday lenders associated with native American tribes can flaunt the law with impunity. Consequently, we can assume with much accuracy that payday lenders work in all 50 states. Extrapolating on that thought makes it crystal clear that payday loan companies were working in all 50 states during the pandemic.
That doesn’t negate the fact that payday revenue was down 17% across the board. This number came from a survey of Payday loan companies and have no source of verification. The Washington Post reports that over $500 million in federal relief money granted during the pandemic went to debt collectors working for payday loan companies. Small business collection agencies. Alot of that debt was more than likely incurred before people were put out of work. All these facts and figures are interesting because most people think that payday lending is a niche market, consequently not affecting them. That’s not the case when 500 million dollars of government funds are being snatched up by these companies. Here’s the kicker. More than 1800 small business loans were given to debt collectors and high interest lenders, AKA payday loan companies with the aid to these businesses topping off at more than 580 million dollars. Taking the 500 million dollars in collection, and adding it to the almost 600 million that was given to the collection agencies is the Stark reality people need to understand. Payday loans affect all of us All of the above begets the final question. What is going on today in the payday loan industry? In my opinion it’s the same old same old. We live in a time where certain things just can’t be stopped. With the advent of online advertising, and the universal access people have to the internet payday loans will be a permanent part our society for the long and distant foreseeable future. As a PostScript to all of this, payday loans were initially conceived to help people who had an unexpected expense, or situation that that was difficult. Payday loans in their original form were good.
The reality is that like most things profitable they were oversold to the wrong people consequently bastardizing the original concept. Even in the form they take today, used properly by the consumer with tiny little bit of altruism, and honesty from the issuers, payday loans can still help people. Unfortunately, business doesn’t work that way. Hence the bottom line. Payday loan companies continue to flourish, making those who run them very rich. They have during the pandemic, and they have before the pandemic. One day payday loans might end up being the world’s second oldest profession.
Federated Financial Wants You To Be In Charge Of Your Money
Most payday companies won’t advertise that their loans come with interest rates that will cost more than the loan itself. Consumers are paying a hefty price for a quick cash injection but the underlying costs are usually too much for anyone to bear.
When you contact Federated Financial, they will make the effort to help you take control of your financial situation. Not only will they make your debt manageable so you can get it paid off, but they will also make sure you understand every step along the way. This way, you will stay in control of your money. If you’re tired of handing the majority of your paycheck over to lending companies, then it’s time you take control. Give Federated Financial a call to find out where to start.