The payday lending industry is evolving, but its newest products may simply provide consumers with a different route into a money hole.
Payday lenders are increasingly turning to installment loans, with all of America’s biggest payday lending companies now selling the products, according to new research from Pew Charitable Trusts. Instead of requiring repayment of a loan within days or weeks, these products are repayable over several months.
On the face of it, these loans may seem like a better deal for borrowers because they provide more time to repay the lender, and consumers tend to prefer an installment payment structure, Pew found. Yet the foundation is warning that the installment loans carry many of the same hallmarks of the traditional payday loans, such as sky-high interest rates. And lenders are shifting to installment loans partly because the products sidestep some state regulations and the Consumer Financial Protection Bureau’s (CFPB) proposed payday lending rules.