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Payday Lending: Evolution, Issues, and Evidence

In: Household Credit Usage

Author

Listed:
  • Katherine A. Samolyk

Abstract

Payday loans (also called deferred presentment loans) are small, very short-term loans extended with minimal underwriting in exchange for a postdated check. The typical payday loan is a two-week loan for an average amount in the range of $250–$300. A typical fee of $15–$20 per $100 borrowed translates into a very high annualized rate of interest (APRs of 390 percent or more). In states that do not have specific legislation that permits payday lending, usury ceilings would generally prohibit the high APRs associated with typical payday loan fees; however in some states, either the absence of usury ceilings or the existing small-loan laws have allowed payday lenders to operate. As of year-end 2006, payday stores were operating in 40 states and in the District of Columbia.

Suggested Citation

  • Katherine A. Samolyk, 2007. "Payday Lending: Evolution, Issues, and Evidence," Palgrave Macmillan Books, in: Sumit Agarwal & Brent W. Ambrose (ed.), Household Credit Usage, chapter 0, pages 175-200, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-60891-7_11
    DOI: 10.1057/9780230608917_11
    as

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