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:

• One in 3 online borrowers has taken out a loan set up to withdraw only the fee on the customer's next payday, automatically renewing the loan without reducing principal or to increase borrowers' costs with unnecessarily long repayment periods;
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• Nine of 10 payday loan complaints to the Better Business Bureau were made against online lenders, while online loans account for only about a third of the payday loan market. Most complaints deal with billing or collection issues, other problems include fraud, harassment and dissemination of personal information;
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• Three in 10 online payday loan borrowers report being threatened by a lender or debt collector. Threatened actions include contacting family, friends or employers, and arrest by the police. Many of the threat types violate federal debt collection laws; and
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• A 650% annual percentage rate (APR) is typical for lump-sum online payday loans. Online installment loans, which are paid back over time in smaller increments, range in price from around 300% APR to more than 700% APR from lenders who are not licensed in all of the states where they lend.

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.

Fraud and Abuse Online: Harmful Practices in Internet Payday Lending