Payday Loan Metrics & Credit Building

By | Dec 2, 2012

Jer Ayles-Ayler TrihousePayday loan lending transaction volume is booming all over the world! Witness the U.K. lender Wonga (founded by an ex-Google executive). Wonga approved a whopping 2.4 million loans last year, an increase of 300% over 2010.

In addition to the controversy surrounding these small dollar loans and their perceived “high fees” (let’s not get into the costs associated with processing these $300 loans nor the default rates here), mortgage loan lenders are beginning to “frown” on borrowers who have used a payday loan in the past to solve a temporary financial challenge.

This trend is a bad omen for the payday loan industry unless we achieve further inroads with credit reporting agencies – the big 3 – to include consumer debt payment, utility payment, and rent payment history. The Consumer Finance Association’s (UK) chief executive Russell Hamblin-Boone, who leads one of the four major trade bodies that represent the payday loan industry, “Does not think it is fair borrowers with a payday loan are frowned upon by some mortgage lenders.”

“Independent research shows 85% of payday customers have no difficulty repaying their loan, so to decline a mortgage application because a person has taken out a payday loan is an unfair judgement,”  says Mr. Hamblin-Boone.

We at Trihouse are aware that PRBC has done some work in this area and look forward to learning more about their effort. Trends regarding data collection and reporting of consumer payment history and credit building are issues that all of us in the small dollar loan industry are watching. Of course, so is the CFPB :o) For more on this issue refer to Guy Anker’s piece at: MortgageStrategy

Jer – Trihouse

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2 Comments so far
  1. John December 2, 2012 7:32 pm

    So is there any way to increase the reporting between the credit agencies and the small debt potential clients owe?
    John

  2. Payday Loan Industry December 5, 2012 12:25 am

    Refer to our “Payday Loan Bible” where we discuss 3 companies offering borrower debt outstanding and payment history with utility bills, apartment rental history, cell phone payment performance…

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