December 24, 2008

Payday loans an $8 billion U.S. industry

U.S. residents pay up to $8 billion annually to secure payday loans as the financial service has exploded in popularity nationwide, officials say.

Check Into Cash founder W. Allen Jones said with at least $50 billion doled out by payday lenders nationwide each year, the payday loan industry has become a lucrative business practice, the Los Angeles Times said Wednesday.

It's the craziest business, Jones said. Consumers love us, but consumer groups hate us.

A California Department of Corporations report said those annual loan estimates represent levels 10 times higher than levels from a decade ago, the Times reported.

While the financial service does offer U.S. workers a chance to get a paycheck advance during the current economic crisis, some critics claim it merely takes advantage of desperate individuals.

Jean Ann Fox, director of consumer protection for the Consumer Federation of America," told the Times that Jones' estimated $500 million fortune was built on middle-income workers' desperation.

We look at those big pots of money and we know where it came from: low- to moderate-income workers who are writing checks each week without money in the bank, Fox said.