The final report in the "Payday Lending in America" series discusses the safeguards that are necessary to create successful small-dollar loan markets, and presents an analysis of a recent Colorado law change showing these safeguards can be applied while maintaining access to credit.
Pew’s research conclusively shows that payday loans are unaffordable for most borrowers. The loans require payments equal to one-third of a typical borrower’s income, far exceeding most customers’ ability to repay and meet other financial obligations without quickly borrowing again.
In its final report in the Payday Lending in America series, Pew provides guidance for federal and state policymakers on how to make the payday loan marketplace more safe, transparent, and predictable.
Pew’s recommendations draw on a detailed analysis of regulation in Colorado, where state policymakers replaced a single, unaffordable, lump-sum repayment with a series of installment payments distributed over six months.
A poll of payday loan borrowers, which also appears in the latest report, indicates support for such reform—an overwhelming 9 in 10 support a system of installment payments over time instead of the conventional lump-sum-repayment structure.