This statistic I don’t think is a healthy one for our country. What do you think this phenomena is more symptomatic of? Poor people down on their luck without access to needed credit to make ends meet. Or, poor people overextending themselves because they can’t live within their means. I think it’s a mix, but probably more of the former.
You are doing the wrong comparison. You are comparing all the outlets for an industry with all of the outlets for one brand in that industry. If you add up all of the fast food outlets (McD’s, BK, Wendy’s, Taco Bell, etc.), it is many times more than 20,000.
Not that it makes it any better, but then you are at least doing the comparison correctly.
It’s a valid point in that there are a tremendous number of McDonalds. BrotherCadFael is correct in that it’s not comparing one entire industry to another, but the number is still staggering. Frankly the practice needs far greater regulation.
Good point. There are probably more fast food outlets than Bank of America branches. But does that mean that people today care more about junk food than managing their finances?
But if they can’t get their payday loans, how are they going to afford McDonalds?
Solution: self-serve payday loan kiosks in every McDonald’s
Based on the information in this staff report, that’s only a little more than one location per incorporated area. Maybe not so alarming.
Pay day loan stores make their big money on the pay day loans themselves, but don’t forget that they do a lot more. For much more reasonable fees, you can cash a paycheck, send Western Union, buy money orders, etc.
When you consider that 15% of the US isn’t eligible for a checking account (for reasons such as bad banking history), then it isn’t surprising that 20,000 locations would be needed to serve 45,000,000 people. If you’re an illegal immigrant sending money home, where else are you going to go? If you can’t get a checking account, but need a money order to pay your landlord, where do you do that?
Anyway, as far as the cause goes, I think it’s pretty straightforward, as described in the article. If you’re living paycheck to paycheck without emergency savings, then you’re always one emergency from financial distress. Most of these loans are going to people with medical bills, car repairs, eviction threats, etc. They would tell that these things are “unexpected” or “out of my control” and important enough to be worth any cost at the moment.
Of course the root problem is that they’re living paycheck to paycheck without establishing savings. But once you’re in that trap, it’s very hard to get out of it.
I think it makes more sense to count the number of customers than the number of physical locations. I don’t think there’s any reason to assume that a single Payday loan business serves the same number of customers a fast food location serves, but that’s the implication if you count number of businesses.
I also think that you should be wary of stricter laws. At least part of the reason that the numbers keep growing is that we have legitimized such businesses to a great extent, so they operate in a way that they can be counted. Back when we had usury laws with teeth and there were no payday loan businesses, there were still people in need of short-term credit who couldn’t get it from traditional banks. The market found a way to serve them, but with a lot more blunt force trauma to the kneecaps.
That’s not to say that additional regulation might not do good, but it’s not a given that it would. Some people would still need or want this, and would resort to more desperate and dangerous options.
Good point. There’s a Payday Loan place near me, and I rarely see anyone patronizing it. Lunchtime, broad daylight. One car in the parking lot that probably belongs to the only staff member on duty, and no customers in sight. Fast food locations, however, do pretty brisk business both day and night.
You think it’s the former? That poor people need more credit? That’s preposterous. People with low incomes and no savings get no credit, because they have no demonstrable means to pay it back. Payday loan places lend on their next paycheck, which in most cases is for work already accomplished, as one’s paycheck is usually for the previous week or two weeks, not including the current week.
To answer your question, it’s patently obvious the answer is the latter. If you need a payday loan, you are living beyond your means, no matter how much you make, how frugal you are or how basic your lifestyle is. Can it be justified on an occasional basis? I suppose, if one imagines an unexpected expense that needs paid. But it’s obviously the first shovel in the ground digging a very hard hole to get out of.