KC Fed examines payday loans and how many of them end badly for lenders, borrowers
A debate on payday loans to Federal Reserve Bank of Kansas City, Tuesday stumbled upon a simple question: How many times these loans end badly </ p> Lenders <p> that 90 percent of the loans are repaid at maturity and that only 3 to 5 percent in the end do not pay. </ P> The costs missed payments and lost, however, amount to 20 percent of the income of lenders, said Darrin Andersen, president of QC Holdings Inc., a payday lender based in Overland Park.</ P> "If they pay us, we are the only money, not them," said Andersen. </ P> <p> Opponents say payday loans that borrowers often borrow many times and many end up in a debt spiral. </ P> Josh Frank, a senior researcher at the Center for responsible lending, said his study showed that the loans ended badly for more than 40 percent of borrowers in post-dated checks they wrote for Lending rebounded. </ P> Andersen questioned the study and do not believe that "there is a debt spiral."</ P> Fed seminar examined whether the restrictions on payday loans could harm consumers. </ P> Kelly Edmiston, Fed economist primary research, the results based on data from consumer credit in the counties that authorized payday loans and those without. </ P> Edmiston study "suggested" that low-income consumers have less access to credit and all consumers generally had poorer credit where payday loans were banned.It may be that they have no alternatives or are more expensive choices, such as NSF, which exceeded the limits of credit card or to turn to loan sharks. </ P> "I am careful to say", suggests, "because there is much room for further study," he said </ p> Edmiston said he does not advocate or restricted .. But he said his work and that of others showed there was potential consumer harm to weigh when considering restricting payday loans.