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 Mar '13Feb '13
# of CUs7,0097,048
Members
(millions)		96.796.4
Total Assets
($ billions)		1,080.41,062.5
Total Savings
($ billions)		931.1914.6
Net Cap.
/Assets		10.2%10.4%
Loans to Savings66.3%67.3%
Loan Delinq.1.0%1.1%

         Credit Union Indicators

Pew Takes On Payday Lending

Series of reports from the research center will explore questions about the industry.

July 27, 2012

The Pew Charitable Trusts is looking into the payday lending market and examining ways to create a safe and transparent marketplace for those who borrow small sums of money.

In recent years, credit unions have entered the small loan market to compete with payday lenders, providing an avenue for growth and a less risky, less expensive alternative for consumers.

"Payday loans are marketed as two-week credit products for temporary needs. In truth, average consumers are in debt for five months and are using the funds for ongoing, ordinary expenses—not for unexpected emergencies," says Nick Bourke, project director for Pew's Safe Small-Dollar Loan Research Project.

Credit unions often provide small loans at much more reasonable rates.

The first Pew report in a multipart series on the topic paints a portrait of the roughly 12 million borrowers that spend approximately $7.4 billion on payday loans each year.

Here's a look at some of the top-level findings, which should interest credit unions seeking to expand or enter the small loan arena.

Who uses payday loans?
On average, a borrower takes out eight loans of $375 each per year and spends $520 on interest.

Why do borrowers use payday loans?
Most borrowers use payday loans to cover ordinary living expenses over the course of months, not unexpected emergencies over the course of weeks.

What would borrowers do without payday loans?
If faced with a cash shortfall and payday loans were unavailable, 81% of borrowers say they would cut back on expenses. Many also would delay paying some bills, rely on friends and family, or sell personal possessions.

Do payday lending regulations affect use?
In states that enact strong legal protections, the result is a large net decrease in payday loan use. Borrowers are not driven to seek payday loans online or from other sources.