The PayDay Loan Industry is Booming

The payday loan industry has always been big business. There are more payday loan lenders than McDonald's franchises in the US. In economic recessions payday lenders become a convenient option for cash-strapped borrowers who live paycheck to paycheck. The industry has been simultaneously lauded as an important resource that enables the poor to stay afloat on their bills and condemned as an unscrupulous exploitation of desperate people, similar to a loan shark.

When you look at case studies of borrowers who have received payday loans, the majority end up in a significantly worse financial situation than when they started. CBS did a segment on the industry last year, and reported one case wherein a woman ended up owing $1,500 in interest to float a base loan of $200.

With the advent of the Internet, the payday loan business has grown dramatically, virtually unchecked by regulators. Interest rates in this market have sky rocketed to unprecedented levels of 500% - 700%. The Senate is currently reviewing legislation to place caps on online payday lenders.

The video below is an excerpt of the CBS special that aired in July of 2008.