Whether it's because of limited credit history or past mistakes, 50% of the American population use predatory financial products like payday loans because they don't have sufficient credit to access credit cards, bank loans or even online lending.
Why are payday loans predatory? The average payday loan is $400 and charges 600% APR which leads to roughly $80 in fees every 2 weeks. There are $100 million payday loans given out each year in the U.S., creating $8 billion in predatory fees. To make matters worse, most payday loans go to the same people because these loans aren't designed to be repaid. If you don't have an extra $400 today, how can I expect you to have an extra $480 in 2 weeks?
Most thought leaders refer to the 50% of Americans who use payday loan as the "underbanked". Simply because of word association, people often conflate underbanked with under the poverty line. While it's true that over 40% of families below the poverty line utilize payday loans as alternative credit, families making the median income also rely on payday loans to make ends meet. Our market research shows most payday loan borrowers are nurses, teachers, bank employees, government officials wage workers, service workers, retirees and engineers.
Moral of the story? Predatory financial services are everywhere and they prey on everyone.
"People often judge on the choices that you've made, not knowing the options that you had. "
— Justin, Spent: Looking For Change
For more context on why we do what we do, check out the 40 minute documentary below called Spent: Looking for Change. Sponsored by American Express, Spent is a film about everyday Americans without the financial options most of us take for granted and the movement giving them renewed hope.