WASHINGTON (10/6/14)--A report released by the Pew Charitable Trusts has found that Internet-based payday loans often have "serious detrimental effects" on consumers.
The report is the fourth in Pew's "Payday Lending in America" series and reiterates Pew's recommendations that the Consumer Financial Protection Bureau adopt regulatory guidelines to make payday lending safer and more transparent.
As a whole, Pew has found that payday loans--packaged as two-week, flat-fee products--in reality "have unaffordable lump-sum repayment requirements that leave borrowers in debt for an average of five months per year, causing them to spend $520 on interest for $375 in credit."
Other findings in the report include:
Many credit unions offer no-fee, low-interest rate payday alternative loans. The National Credit Union Administration has regulations allowing federal credit unions to offer payday alternative loans with an interest rate of up to 28% and an application fee of up to $20.
According to the NCUA, roughly 500 federal credit unions offer payday alternative loans, with about $23 million in outstanding loans currently. The average loan balance is $382.
Use the resource link below to access the full Pew report.