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Payday Lending Industry Essay

1000 Words4 Pages

Case 8: Cash Connection: Payday Lending Industry
Hillary Bumpus
BUSI 4793: Business Policy
Dr. Trudy Morlino
January 29, 2015

According to A.J. Strickland and Tyler Chapman, authors of “Cash Connection: Are its Payday Lender Strategy and Its Business Model Ethical,” the payday lender industry consisted of more than 22,000 payday advance locations, such as Cash Connection, Cash Advance, Check & Go, and Check America, across the United States. Payday lenders account for more than 10,000 retailers than the 9,500 banks throughout the country. The payday lending industry loans around $40 billion in short-term credit each year to middle-class Americans. Strickland and Chapman stated that the main customer targets are middle income citizens earning between $25,000 and $50,000 …show more content…

Payday lenders earn their profit from fees and interest charges. The fees and charges are inflated due to the loans being a liability to the firms. Strickland and Chapman state that a 2001 study revealed that the demographics of payday lending customers. This industry targeted middle class Americans with steady incomes. Ninety-four percent of customers had a high school diploma, while fifty-six percent of customers had some college or a college degree. One hundred percent of payday lending customers had steady incomes. According to Strickland and Chapman, the average interest percentage for the payday lending industry is 391%. Many times, payday loan services will give an individual a second loan to pay the first loan. Strickland and Chapman stated, “To avoid appearing to roll over the debt, some lenders asked the debtor to take out a “new loan” by paying a new fee and writing another check.” (Strickland & Chapman,

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