The payday loan industry is becoming more sophisticated and reaching deeper into their pockets in order to thwart negative payday loan legislation.
A link over at Nick’s PDL Industry Blog brought this to our attention.
Payday lenders are gearing up for an alternative strategy. The industry believes it has found new support in arguing that payday loans, with annual interest rates that can reach 400 percent, are a cheaper alternative to overdraft charges. The industry is citing a recent USA Today analysis based on data from Moebs Services, an economic research firm. According to the analysis, consumers pay an overdraft fee of $26.68 every time they overdraw their account. So if consumers overdraw by $100, they’d pay an annual percentage rate (APR) of 696%, if the credit is paid back in two weeks – compared with an APR of 450% on a $100 payday loan with an average fee of $17.25, according to USA Today.
“The focus on overdraft protection on the Hill has helped legislators to understand that payday lending can be looked at as a cheaper alternative to overdraft charges,” said Steven Schlein, a spokesman for the Community Financial Services Association, the trade group for payday lenders.