The findings, shown in the graphic to the left, reveal what has long been known: the terms of the payday loan product combine to create a debt trap by design. The CFPB study was based on an analysis of 15 million payday loan transactions over a 12 month period - data that was provided by the payday lenders themselves.
The study confirms the importance of upholding Pennsylvania's strong laws, which effectively prevent the payday debt trap from flooding into our neighborhoods. Data revealed that:
- Payday loans carry on average a 339% APR
- 1 out of 4 payday borrowers borrowed against their public benefits, such as Social Security Income, or retirement funds as collateral for the loan.
- The average borrower is stuck in payday loan debt - with a single company - for nearly 200 days.
- Borrowers taking out 10 or more loans a year account for 75% of payday lenders' revenue.
With these findings confirming not only the decades of research by others, such as the U.S. Department of Defense, Pew Charitable Trusts, Center for Responsible Lending, but also the experiences from states that, unlike Pennsylvania, have legalized 300% APR, two-week payday loans, it is more important than ever to uphold Pennsylvania's existing strong laws.