More on Payday Loans

On Sunday, Brian posted a link to the Times story, Major Banks Play Key Role in Payday Loans Banned by States.  Yesterday, the Times followed up with a report, Dimon Pledges to Change JPMorgan’s Practices on Payday Loans. The specific practice that has drawn Dimon's ire is of withdrawing money from depositors' accounts to repay payday loans even over the objection of the depositor.   But the original article also noted that the federal government also plays an important role in thwarting applcation of state usury laws by providing that the usury law (or lack thereof) of the state where the lender is located applies to consumer loans, not the law where the consumer lives.  While three years ago duiring consideration of what became the Dodd-Frank Act, the Senate reconsidered that law–called the exportation doctrine because states export their usury laws to other states– some Democrats joined all nearly all the Republican senators to preseve the exportation doctrine.

Meanwhile, Pew has issued a new study, Payday Lending in America: How Borrowers Choose and Repay Payday Loans.  According to the accompanying press release:

Pew’s survey results reveal that people choose these loans to avoid outcomes like long-term debt, borrowing from family or friends, overdraft fees, and cutting back further on expenses. But the average loan requires a repayment of more than $400 in two weeks, the typical duration, when the average borrower can only afford $50. When borrowers have trouble paying off the loan, they return to the very same choices they initially tried to avoid.