Payday Loans, Usury and Small Dollar Credit

Marketed as a way to help consumers pay the bills until their paychecks arrive, payday loans trap consumers in terrible cycles of debt, dragging their families more deeply into financial crisis. In return for a loan the consumer provides the lender a post-dated check for the amount borrowed plus a fee. The check is held for one to four weeks (usually until the customer’s payday) at which time the customer redeems the check by paying the face amount or allowing the check to be cashed. Payday lenders encourage their customers to get on a debt treadmill by refinancing one payday loan with another. The fees for payday loans are exorbitant with effective interest rates that can top 1,000 percent.

The repeal of usury laws has allowed payday loans and other predatory lending to flourish.

Policy Analysis and Advocacy

NCUA Letter Highlights Dangers of False Credit Union Payday Loan "Alternatives", July 30, 2009 PDF 37KB

Press Release: Bank Payday Loans... They're Baaaack: 650% APR Loans on Prepaid Cards and Bank Payday Advance Loans Flout State Interest Caps and Protection, June 2009 PDF 36KB

Letter opposing preemption of Arkansas usury rate, May 18, 2009 PDF 15KB

Support letter for S. 582, Interest Rate Reduction Act, March 27, 2009 PDF 11KB

Letter opposing payday loan bill, H.R. 1214 (Gutierrez), March 23, 2009 PDF 15KB

Letter in support of S. 500 (Durbin), establishing 36% national usury cap for all credit, March 2, 2009 PDF 74KB

Letter to NCUA about credit union payday loans and need for guidelines for payday loan alternatives, January 27, 2009 PDF 182KB

Press Release: Scorecard Shows Many States Fail to Protect Consumers From Abusive Lending Practices (Statutory Backup), August 27, 2008 PDF

Press Release: Consumer Groups Applaud Legislation to Halt Check Kiting for Loans, June 27, 2007 PDF 15KB

Press Release and Report: Utilities and Payday Lenders: Convenient Payments, Killer Loans, June 5, 2007

Letter: Regulatory Alert Letter to All State Bank and Other Regulators Regarding Payday Lending and Related New Scams, November 2005 PDF 87KB

Chart: Revised Chart of State Payday Loan Charts, November 2005 PDF 94KB

Summary: Updated Summaries of State Payday Loan Laws, November 2005 PDF 233KB

Model Deferred Deposit Loan Act: to protect consumers who enter into short-term, high rate loans from abuses that occur in the credit marketplace when such lenders are unregulated.  

Analysis: Deferred Deposit Loans