People who are cash strapped cannot access traditional lines of credit, or access credit cards. Having emergency needs, and meeting basic needs month to month has meant payday lenders become financial institutions of the poor.
How does payday lending result in a cycle of debt? A lack of sufficient income is the predominant driver that brings people into predatory lending institutions. When an emergency or acute financial need occurs, people are unable to access low-interest credit, are left with few options and the resulting outcome is the use of payday lending. With interest rates at $15 per $100, people who are on limited incomes are finding that repaying the loan results in the need to re-borrow.
The Poverty Roundtable HPE drafted a report to identify the issues associated with payday lending and outline the potential for actions.
Access the report here: Payday Lending and a Call for Fair Banking