Payday lending is a rip-off for consumers.
According to the Washington State Department of Financial
Institutions (DFI), the industry grew by 84% over the past
three years and is now making over $1 billion in loans each
Payday loans in Washington cannot exceed $700 for a maximum
term of 45 days. Lenders are allowed to charge fees up
to $15 per $100 on the first $500 borrowed and $10 per
$100 on any amount over $500.
DFI studied the four payday lenders that make more than
half of the loans. All charged the maximum fees allowed.
These fees translate into shocking interest rates.
A $300 loan for five days has a 1,095% annual percentage
Since the fees are paid up-front, the same loan held
for the maximum 45 days has an
APR of “only” 121.67%. Unfortunately, people who use payday
lending keep coming back. Even though each loan is limited
to 45 days, DFI found that almost 50% of borrowers used
payday loans more than once and nearly 10% took the loans
20 or more times.