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It's a scam. It extracts up to an 400% annual percentage rate (APR). It requires short-term balloon payments. They're do every two weeks. They extract 25 - 50% of borrower income. Doing so leaves them unable to handle daily obligations.
It forces them into new loans. If not repaid, they're automatically rolled over. Added interest compounds. What a way to make money. It's sure fire profit-making. It works as planned.
In 2010, three million Americans got payday loans online. Doing so expands a lucrative profit source. By 2016, forecasts estimate 60% of payday borrowing this way. It's nearly double 2011's level.
Offshore sites operate. Doing so circumvents state regulations. Shell companies run them. Anything goes is policy. Consumer protections don't exist. Scams are easier than ever. Clever crooks find new ways to steal. It's easy when no one stops them.
New loans follow old ones. Many happen almost immediately. At times it's in a day or less. Doing so locks borrowers in debt. That's what lenders have in mind.
Borrowers "generally open new loans in rapid succession." Around 87% of new ones occur during the next pay period. Half come when borrowers are first able. They're after partially repaid old ones.
"Churning" guarantees big profits. Nearly 59 million loans exceed $20 billion. Loans to one-time borrowers account for 2% of volume.
Churned loans produce $4.5 billion in annual fees. Unwary borrowers don't know what they're getting themselves into. They enticed with first-time discounted or free terms.
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