With lines of credit being closed even to customers in good standing, banks could be sending some of their former consumer lending business to more expensive alternatives. A representative from a major payday lender told Reuters that his company observed a significant rise in the average annual income of first-time payday borrowers, up to $50,000 from $41,000 last year.
Credit industry analysts note that increases in payday lending may only be short-lived, however. Many states have curbed or banned advance check lending, which can often carry annual percentage rates in excess of 400%. Rising unemployment has cut into many payday lenders' prospective client pool, since their loan agreement requires customers to maintain jobs.
About the Author
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.