Industry Giants on the RecordMorgan Stanley IPO Analysis of Advance America:
'The Georgetown study reveals the long-term nature of much payday lending. At a 300 percent APR, the interest on a payday advance would exceed the principal after about four months. In these circumstances, the loan starts to look counterproductive: rather than bridging a gap in income, the payday advance may contribute to real financial distress. Advance America.s disclosures show that repeat borrowing is important.'
Dan Feehan, CEO of Cash America at Jefferies Financial Services Conference, 6/20/07
'And the theory in the business is you.ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that's really where the profitability is.'
Ernst & Young Analysis of Payday Lending Business Model:
'The survival of payday loan operators depends on establishing and maintaining a substantial repeat customer base.'
FDIC Center for Financial Research:
'We find that high-frequency borrowers account for a disproportionate share of a payday store.s loan and profits.'
Michael Stegman's "Payday Lending: A Business Model that Encourages Chronic Borrowing" - Economic Development Quarterly:
'The financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers.'
Roth Capital Partners, First Cash Financial Services Inc Company Update, 7/16/07
'A note about rollovers. We are convinced the business just doesn't work without them.'
Stephen Winslow--Harrisonburg, Virginia Payday Store Manager:
'This industry could not survive if the goal was for the customer to be .one and done.. Their survival is based on the ability to create the need to return, and the only way to do that is to take the choice of leaving away. That is what I did.'
'My customers were not stupid or ignorant - they were in crisis. I ended any ability they may have had to overcome that crisis by putting the final nail in their financial coffins.'
Rebecca Flippo - Virginia Payday Store Manager:
'These companies feed on the people living on a paycheck-to-paycheck basis.The customers who do come in and repay the loans take out another loan right then almost every time.They want to create a dependence on their services so the customer is forced to reissue the loan on every payday.'
'We saw most of our customers every month.'
'We really played down the APR. We disclosed it, but we played it down.'
Mark Pearce, NC Deputy Commissioner of Banks, Testimony at the District of Columbia Committee on Public Services and Consumer Affairs hearing, 6/21/07
'Two-thirds of people who had been payday loan borrowers say that the absence of payday lending has had absolutely no effect on them at all. Of the one-third that remains, a 2 to 1 margin say that payday lending is a bad thing, as opposed to a good thing.'
Veritec Solutions LLC, 2002 Annual Report Commentary, May 2003, available at http://www.veritecs.com/AnnualReportCommentary.pdf
'Even under the tough Florida laws [$10 per $100, database, no more than one loan at a time] payday lenders earn a majority of their fees from...customers who take out an average of at least one payday loan per month.' |