Surprising statistic of the day. There are more payday loan franchises in Ohio, my home state, than McDonalds, Wendy’s, Burger King combined. According to this report on pay day loans in Ohio these places charge on average $15 per $100 loan for a two week period. For those of you without a calculator that is an average interest rate of around 400% a year! I’m not an expert on payday loan places, but like the fast food industry it seems that there are several different companies. I assume if one wanted to start their own payday loan place they could if they had enough money, or could borrow enough. In this type of situation economists would predict that if profits could be made at a lower interest rate someone would come in and charge $10 per $100 per two-week period. So I think what this interest rate suggests is there is an extremely high level of default for payday loans.
Clearly the tougher question is how would/could regulation improve the payday loan industry and consumers.
In other news I got my first pay check from Towson today. Thank you Towson!