Who Makes Payday Loans?

At the beginning of the 1990s, payday lending was primarily the domain of smaller independent check cashing outlets and pawnshops that offered services related to check cashing. These firms specialized in making high-priced loans to borrowers with limited access to credit.

The number of payday lenders, however, has surged in recent years as more companies have been attracted by the higher fees earned on payday loans, as well as a high level of consumer demand for short-term, small denomination credit. New payday participants include large regional or national multi-service providers of payday loans, large regional or national monoline payday loan entities, and insured depository institutions. Although the number of known insured depository institutions involved in payday lending is small, third party payday lenders are actively seeking relationships with insured financial institutions.

Industry analysts estimate that the number of payday loan offices nationwide increased from less than 500 in the early 1990’s to approximately 12,000 in 2002, with continued growth expected. The Community Financial Services Association of America, a trade group of the payday lending industry, estimated that payday lending activity in the United States during 2002 would reach about 180 million payday loans with a gross dollar volume of $45 billion.

source: fdic.gov

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