Today, the Center for Responsible Lending released a new report examining the repayment experiences of borrowers of longer-term payday loans in Colorado. The report is based on focus groups that were conducted in four Colorado cities in September 2017. The full report is worth the read, but here are the key takeaways:
- In many cases, unaffordable loan payments triggered significant additional financial hardships, either immediately or down the road, such as not having enough money remaining to meet other basic expenses, aggressive debt collection, and damaged credit reports.
- Payday lenders made back-to-back loans to borrowers and made payday loans to borrowers who already had outstanding loans from other payday lenders, both of which indicate payday lenders’ failure to assess whether the loan can be paid without re-borrowing or in light of a borrower’s existing debt load.
- Payday borrowers faced frequent financial challenges and elevated levels of debt from a wide range of sources such as student loans and medical debt that pushed them to seek other, often high-cost debt and made the repayment of their total debt load difficult.
- While many payday borrowers looked to payday loans to avoid other credit options, many viewed borrowing from credit cards and family and friends as an available option for them.