Posts tagged Jobs

Source: consumerist.com – Thursday, May 02, 2013
( her name is meg ) Among the reasons given in support of payday loans — short-term, high-interest loans intended to get the borrower through to the next paycheck — is that they ultimately provide a net good to the economy, allowing the borrower to keep spending and earning interest for the lender. But a recent report casts some doubt on that belief. According to a recent white paper [ PDF ] from the Insight Center for Community Economic Development, the huge fees — the Consumer Financial Protection Bureau calculates the average APR on a payday loan is 392% — may make billions for lenders, but would be better for the economy if spent elsewhere. Writes the Insight Center: The economic activity generated by payday lending firms receiving interest payments is less than the lost economic activity from reduced household spending. Specifically, each dollar in interest paid subtracts $ 1.94 from the economy through reduced household spending while only adding $ 1.70 to the economy through spending by payday lending establishments. As a result, for each dollar of payday lending interest paid, an estimated 24 cents is lost to the U.S. economy. For example, a payday loan that carries an interest payment of $ 40.00 causes a loss of $ 9.60 — nearly one-quarter of the fee — from the economy. The researchers calculate that for 2011, during which payday lenders took in an estimated $ 3.3 billion in interest, the net loss to the U.S. economy was $ 774

Report Claims Payday Loans Result In Net Loss Of Money, Jobs