The payday advance industry has grown significantly and is expected to continue this trend into the 21 st century. This growth reflects the broader national trend toward increased convenience and customer service.
Hundreds of thousands of consumers with steady incomes find that payday advance services are the perfect solution to their short-term financial needs. In California, 750,000 consumers per month use this service, and that number is expected to increase to 1 million within six months.
According to a recent survey, 47 percent of Californians are occasionally unable to pay bills due to a cash shortfall. And 29 percent of California residents said they would obtain an advance on a paycheck for a fee. The survey also noted that of those who would consider getting a payday advance, 57 percent have household incomes of $30,000 or more. Fewer than 18 percent have a household income under $20,000 per year (see survey notes below).
BANKS CANNOT MEET THE NEED!
Since banks do not offer short-term loans, consumers - in growing numbers - rely on payday advance services. By choosing to use these services, consumers are making a cash-flow decision, not a loan or credit decision. Today, many banks offer comparable services and fees, but only for their direct deposit customers.
Wells Fargo's Direct Deposit Advance, for example, allows customers to receive a portion of their direct deposit income before payday. The only way that check cashing is different is that it does not have the guarantee of direct deposit.
The high risks involved in offering payday advances are a large reason that other financial institutions refuse to provide the service to all their customers, rather than only those with direct deposit.
The California Financial Service Providers (CFSP) is the only statewide organization representing Califomia's payday advance industry. Working with national, state and local officials, the association actively promotes regulations that protect the rights of both consumers and businesses. For more information, please contact Blake Miraglia at (925) 676-1418 (ext 104) or Tom Leonard at (559) 299-9609.SURVEY NOTES
A total of 502 residents of California were surveyed March 4-7, 1999, by YWR Research Group, a company based in Santa Ana, CA, with its telephone center in Las Vegas, NV. All respondents shared responsibility for their household's bills and all have a regular source of income to cover their monthly living expenses. The sampling error is plus or minus 5 percentage points at the 95-percent confidence level. These results were obtained from Community Financial Service Association, the national trade association of the payday advance industry.