Payday Loan Industry

The payday loan industry came into existence to directly serve a consumer need for a cash advance. The industry provides an important avenue for those who suddenly find themselves in a financial crunch. Often these funds must be obtained by individuals who have to rely upon their own anticipated resources. When these individuals lack access to conventional means of credit, such as banks, other entities were developed to meet this consumer need. Variations of these entities are often called cash loans, cash advances, payday loans, or payday advances.

The payday advance industry was virtually nonexistent until the late 1980s and early 1990s. However, upon it’s inception it became one of the fastest growing industries in the United States. Take Utah for example. Recent growth of payday lenders in Utah has been astronomical. The first store appeared in Utah in 1984. In 1994, 17 were in the Salt Lake area. Now, state-license lists show Utah has 381 payday loan stores and online lenders.. Between 2000 and 2003, the number of outlets offering cash advance loans more than doubled to 20,000—not counting the many online lenders. Just before Christmas last year, more than 10 million people took out a payday loan, according to industry statistics.
The cash advance industry has taken off due to a number of factors. One reason is the mergers and acquisitions transpiring in banking, and the passage of new consumer finance and credit laws. Additionally, high bank fees are driving this business. According to the latest national surveys, the average bank charge for a NSF check is $21.39. That is for the first check. Of course, the original recipient of the check will charge a fee also. If a check writer were to bounce checks for $30, $35, and $41, bank charges could easily exceed $60 to $80 or more.
The payday loans industry has also grown in recent years as new services, such as online lenders, prepaid debit cards have grown in popularity among consumers.

One payday advance group estimates that currently there are over 40,000 people employed in the industry with $1.1 billion in wages paid by cash advance employers and in 2007 over 100 million payday loan transactions will take place and over 12 million households will be served.

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