Calling them the Lays potato chips of finance – because they’re not good for you, but you can’t have just one – John Oliver in a recent segment described payday lending as “one of America’s most resilient industries” – a $9 billion industry that’s been around for just over 20 years.
Payday lending companies present themselves as a way for people to get back on their feet, but the loans are often accompanied by frightening levels of interest and fees that consumers probably aren’t aware of. That’s why so many people become trapped in an impossible pattern of repayment.
According to a CFPB report released last year, payday loans’ circular repayment structure and lack of underwriting creates for many consumers a cycle of indebtedness. “To the extent these products are marketed as a short-term obligation,” the report says, “some consumers may misunderstand the costs and risks, particularly those associated with repeated borrowing.”
Established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB began overseeing payday lenders in January 2012, and as of November 2013 accepts complaints from borrowers who encounter issues with payday loans.
The Leadership Conference on Civil and Human Rights passed a resolution at its national board meeting in December 2013 urging states, Congress, and federal agencies to increase regulatory oversight and enforcement of payday lenders.
See Oliver’s entire segment on the industry below: