Payday Loans are a trap of high interest loans for people who have a hard time repaying what they borrow. Oklahoma, Missouri and Washington are the states with the most storefronts that lure borrowers.
The Pew Charitable Trusts has identified nine states where the highest percentage of residents had taken out payday loans. Oklahoma came in as the first highest, Missouri second and Washington state is third. The study identified three categories of payday loan regulations: Restrictive states that either prohibit or call for lower interest rates; Hybrid states that allow payday loans, but implement strict regulations; Permissive states that are lax in their policies and allow higher interest rates. According to the study, nearly 5.5 percent of Americans utilized the short-term loan service between 2005 and 2010. “Several states prohibit payday loan storefronts altogether, suggesting that the loans take advantage of low-income borrowers.”
What´s the Big Idea?
Payday loans are very high in interest and other fees, and target people who struggle to repay their loans. The more access to payday loan storefronts—the more likely it is people will utilize such services. There are three categories of payday loan regulations: restrictive, hybrid, permissive. “In the country, 28 states are permissive, eight are hybrid and 15 are restrictive.” Eight out of the nine states are permissive, Washington is the only state that is hybrid—so borrowers are somewhat protected there, but also enabled.