WWW.PEWTRUSTS.ORG/SMALL-LOANS
41
ENDNOTES
20 Amanda Logan and Christian E. Weller, “Who Borrows
from Payday Lenders?” (2009); Gregory Elliehausen, “An
Analysis of Consumers’ Use of Payday Loans,” Financial
Services Research Program, Monograph #41. (2009).
21 This figure is the average number of loans used based
on the 2010 state reports from Florida, Oklahoma, and
Washington. It also is consistent with data released by
other states that either lack a database or did not publish a
2010 report, such as Michigan’s 2007 data, Virginia’s 2008
data, and California’s data from 2006-2010.
22 “Florida Trends in Deferred Presentment,” Program
Status Report, (May 2010), www.veritecs.com/
Docs/2010_06_FL_Trends-UPDATED.pdf.
23 In 2011, the average payday loan at the nation’s largest
payday lender—Advance America—was $375, based on
its annual (10-K) report. Industry analyst Stephens Inc.,
uses Advance America as a proxy for the payday lending
industry. Stephens Inc. “Payday Loan Industry,” (2011).
24 This figure is based on using the average loan size
($375 in Advance America’s 2011 Annual Report), the
average number of times (eight—based on data in state
reports) in a year. Three quarters of these are storefront
loans, charging an average of $55 per loan, based on the
average fee disclosed in Advance America’s 2011 Annual
Report, and similar fees in the other publicly traded
lenders’ annual reports. Roughly one-quarter are online
loans, charging an average of $95 for an equivalent loan,
based on the rates cited by industry analyst Stephens
Inc., in its 2011 report. Six fees of $55 and two fees of
$95 yield our estimate of $520 spent by each borrower.
If all eight loans came from a storefront, this figure would
be $440, while if all eight loans were obtained online,
the figure would rise to $760. These calculations assume
the borrower does not incur any extra fees. The Center
for Responsible Lending has made similar calculations
in its publications, finding that a typical borrower pays
back $793 on a $325 loan, spending $468 on interest.
This calculation was based on storefront lending and was
made before online lending had expanded to its present
level with higher interest rates charged. See Uriah King,
Leslie Parrish, and Ozlem Tanik. “Financial Quicksand:
Payday Lending Sinks Borrowers in Debt with $4.2 Billion
in Predatory Fees Every Year,” (November 2006), http://
www.responsiblelending.org/payday-lending/research-
analysis/financial-quicksand-payday-lending-sinks-
borrowers-in-debt-with-4-2-billion-in-predatory-fees-
every-year.html.
25 Robert DeYoung and Ronnie J. Phillips, “Payday Loan
Pricing,” (Federal Reserve Bank of Kansas City Economic
Research Department, 2009), www.kansascityfed.org/
PUBLICAT/RESWKPAP/PDF/rwp09-07.pdf.
26 Previous surveys also have found that a substantial
percentage of borrowers use payday loans to cover
regular household expenses and other nonemergency
needs. A 2007 study conducted for the California
Department of Corporations reports that half of
borrowers (50.2 percent) selected “pay other bills” as
their reason for using a payday loan (an additional 22.3
percent selected “groceries/necessary household goods”).
The “pay other bills” category is separate from groceries/
necessary household goods, emergency situations, car
repairs, and medical services. While categories differ
slightly between each survey, both surveys separate
regular expenses from food/groceries, emergencies, car
repairs, and other, therefore providing a comparable
benchmark for usage; Applied Management Planning
Group and Analytic Focus, “2007 Department of
Corporations Payday Loan Study,” (2008), www.corp.
ca.gov/Laws/Payday_Lenders/Archives/pdfs/PDLStudy07.
pdf. Also, the Federal Reserve’s 2010 Survey of
Consumer Finances (SCF), which asks about the most
recent payday loan, found 42.4 percent of borrowers
indicated it was for an emergency “and similar urgent
needs or a lack of other options.” The difference in
overall incidence (3.9 percent payday usage in the
2010 survey) between Pew’s results and results from
the SCF may be explained by differences in time period
queried (five-year versus one-year time span). The
large difference in reason for usage in the “emergency”
category is likely a result of survey wording, or including
“a lack of other options” in the SCF question, which
makes its emergency category far broader. Pew’s survey
question was seeking to capture something different
than the SCF, to ascertain the purpose of the loan
(“emergency”), without attempting to combine that with
why the borrower chose a payday loan provider (“lack
of other options”). A borrower may have both a regular