Myth vs. Reality of
Reality: We live in a free market society, if the working poor are willing to pay 100 times the interest rate a rich person would pay (e.g. 550% APR instead of 5.5% APR) there is clearly a market need for our service.
Reality: Debt traps are the cornerstone of payday profitability. Although the 2 week term of a payday loan traps most people in debt, there are a few customers who are able to pay off the loan on time.
Reality: Although it is true that our government regulates some free market activities such as prostitution and drug abuse, payday lending is fundamentally different because it is a financial service.
Reality: Although there is a market need for slavery, people do not choose to sell themselves into slavery. Free choice is the difference between payday lending and slavery.
Reality: Imagine that a borrower takes out a $1,000 payday loan due to a health emergency. One year later, they have paid thousands of dollars in loan fees and still owe the original $1,000. The payday loan enabled the borrower to receive healthcare and resulted in a large profit for our industry.
Reality: The PLA is actively fighting credit unions that provide alternative lending options to the working poor. The success of payday lenders depends on a lack of access to other financial services. Read about the North Carolina crisis.
Reality: Industry analysts estimate that more than 22,000 payday loan locations across the United States extend $40 billion in loans to millions of working poor households. The profit our industry creates is good for the U.S. economy.
Reality: 90% of our industry profits are generated by repeat borrowers who roll over their loans1. Few members of the working poor realize that they will be unable to repay the loan when it is due. Loan rollovers are the cornerstone of payday profitability.
Reality: Critics claim that it is unethical to profit from lending to the working poor. They say, "In the richest country in the world, the poor should not have to pay exorbitant interest rates to take out a loan." These critics fail to realize that the free market is what makes America the richest country on earth.
Reality: In some states, there are more predatory payday lenders than Starbucks™ coffee shops. We are an extremely profitable industry.