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A Balanced View of Storefront Payday Borrowing Patterns

Final month we reported on a research conducted by Clarity Services, Inc., of a tremendously dataset that is large of payday advances and exactly how that research unveiled flaws into the analytical analyses published because of the CFPB to justify its proposed guideline on little buck financing. Among the list of big takeaways: (a) the CFPB’s 12-month research duration is just too short to recapture the entire period of good use of a customer that is payday and (b) the CFPB’s usage of a single-month fixed pool for research topics severely over-weights the ability of hefty users for the item.

The context for the research, as well as the CFPB’s rulemaking, may be the CFPB theory that too numerous payday borrowers are caught in a “debt trap” composed of a few rollovers or fast re-borrowings (the CFPB calls these “sequences”) where the “fees eclipse the mortgage quantity.” A sequence of more than 6 loans would constitute “harm” under this standard at the median fee of $15/$100 per pay period. Continue reading