Payday loans, a lending option for consumers desperate to get cash before their next paycheck, are reviled by the American public. According to a survey released Tuesday by the Pew Charitable Trusts, most people want to see them more heavily regulated and with lower interest rates.
Only one in 10 of those surveyed -- 1,018 people were interviewed -- had a positive opinion of payday lenders. By comparison, credit unions had a 62% positive rating.
Pew said more than 12 million Americans take out payday loans each year. The loans average $375 and come with huge interest rates. Payday lenders typically charged annual percentage rates of 300 percent to 500 percent.
These loans are due by the borrower's next payday. And that's where the borrower gets in deeper. A majority don't satisfy the loan in time and have to renew it, getting hit with more fees while their debt burden gets heavier.
The result is that a typical payday borrower ends up in debt with the loan for five months a year. The interest charges alone will usually exceed $520 for a $375 loan, Pew said.
The Consumer Financial Protection Bureau in March put out a plan to regulate the $46 billion short-term lending industry. That includes auto title loans and deposit advances. Pew's survey was aimed at gathering public opinion as the agency weighs its options.
In addition to Americans favoring payday loan regulation, key findings of the survey include giving borrowers enough time to repay the loans (four to six months rather than two weeks to a month) and interest rates and fees that wouldn't be considered onerous.