Payday Lending Case Study

The Payday Lending Industry in the US - 10 Years of History

Over the past decade in the US, most states have created or maintained a regulatory environment that satisfies the robust consumer demand for these short term, low denomination loans.

Robust Regulation

Working with financial service regulators, State policy makers have balanced the interests of the industry with substantive consumer protections that ensure responsible and informed use of the product. As a result, millions of satisfied consumers have enjoyed the convenience and economic benefits of payday advance services without complaint.

MEM Consumer Finance Ltd has since its inception maintained a similar high standard of best practice.

Customer Survey

Below are the results of a recent payday lending survey in the US - where most data is available. Most Americans are occasionally unable to pay bills due to a cash shortfall, according to a recent national survey sponsored by the Community Financial Services Association, the payday advance industry's national trade group. The survey results demonstrate both a demand and a need for payday advances across a broad range of income levels.

Survey results are based on interviews conducted from February 12-14, 1999 by Bruskin Goldring Research, based in Edison, NJ. A total of 1,016 interviews were completed, 529 with female adults and 487 with male adults via a national telephone omnibus poll. The results are weighted to reflect the actual proportion of US Population of adults with its specific combination of age, sex, and geographic characteristics. The sample size provides results with an error due to sampling at no more than plus or minus three percentage points at the 95-percent confidence level.

Who Are Payday Loan Customers?

While nearly nine in 10 Americans said they typically have enough cash available to pay bills when they are due, MORE THAN HALF (55%) of all survey respondents said they have on occasion found themselves WITHOUT ENOUGH MONEY TO PAY ALL BILLS.

Of those who have, on occasion, lacked enough cash to pay all bills, one-third (32%) make $40,000 or more per year.
Of those who have, on occasion, lacked enough cash to pay all bills, only one in five under $20,000 a year.
More than three-quarters (77.8%) of Americans who make less than $20,000 a year said they typically have enough money to pay the bills.

Why Would Customers Consider A Payday Advance?

Nearly one in five Americans (17.4 percent) said they would obtain an advance on a paycheck for a fee.

Of the respondents who said they would pay a fee for a payday advance, two-thirds (68%) have an annual income of $30,000 or more.
Only 23 percent of Americans who would pay a fee for an advance on their paycheck make less than $20,000 a year.
Nearly one in 10 Illinois survey respondents (9%) said they had bounced at least three checks in the past year.
Half of the respondents (49%) who said they had bounced at least one check in the past year have an annual household income of $30,000 or more.

Where Else Would Customers Go?

While more than 50 percent said they'd turn to a relative or friend in a financial bind, many did not cite this option:

Ten percent of Americans said they would sell some personal possessions.
Another 10 percent said they didn't know what they would do.