Predatory lenders are making money off of rising gas and food prices
Most want to avoid payday loans, which offer quick cash against future paychecks without a credit check and come with an interest rate above 500%. But the rapidly increasing prices of food, fuel and rent gives them few options.
To payday lenders, however, they signal happy days and good times ahead.
Enova declined to comment for this story.
Given the economic dynamics at play, Fisher said his company has “meaningfully leaned into the demand with our marketing efforts,” and spent more to attract new customers. That has paid off. About 44% of all loans were issued to new customers in the last quarter, he said.
Working to drive to work
For those Americans, high-interest payday loans are still easily accessible. These small-dollar amount loans, typically between $100 and $1,000, are available in more than half of all US states with little regulation. Proof of income and a bank account is all most borrowers need to walk out with cash in hand.
Current data that tracks the number of payday loans has yet to be released, but based on past trends there is likely an increase in borrowing, said Alex Horowitz, principal officer for Pew’s consumer finance project. “Our survey data shows that about 70% of payday loan borrowers use the loan primarily for routine expenses and to cope with increased or volatile expenses.”
The debt trap
These loans are often incredibly expensive but borrowers either lack the financial literacy to seek out alternatives or don’t think they have any other option. There is currently no federal cap on maximum interest rates for small-dollar loans. Not all states allow them, and it is up to that states that do to decide whether they’ll implement their own caps.
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