Payday Loan History

Cheque cashing stores were the first businesses...

The first businesses to offer payday loans were cheque cashing stores trying to broaden their financial product range. These cheque cashing businesses started in the 1920s when many American companies began to pay their employees by cheque rather than in cash. Because, on the one hand, some banks were not interested in encouraging lower income people to become customers and, on the other hand, many people lacked confidence in the banks during the Depression era, businesses that cashed cheques in exchange for a fee became popular, particularly in inner city and other deprived areas.

Providing salary advances until the next payday is popular ...

Over time, as the American economy expanded, the banks' credibility improved and this put the squeeze on cheque cashing businesses. These companies were forced to diversify in order to survive and soon found that providing salary advances until the next payday was both profitable for the lender and popular with customers.

Internet Payday Loans

Payday loans really took off following the expansion of the internet...

Outside North America, payday loans really took off following the development and expansion of the internet. Using web-based applications, firms (both US and non-US) found it easy to set up in the UK and the rest of the world, without needing to acquire retail premises or to employ large numbers of staff.

Customers also like being able to apply for payday loans in the privacy of their own homes, rather than having to make a journey to premises often located in a less than salubrious part of town.

Payday Loan Regulation

Attracted the attention of governments on both sides of the Atlantic...

In recent times, the expansion of the payday loan sector, with its high rates of interest and sometimes sharp practices, has attracted the attention of governments on both sides of the Atlantic. In the USA, thirteen states have put caps on the rate of interest that can be charged, or have banned payday loans completely. In the UK, payday lenders are relatively lightly regulated but they do have to obtain a consumer credit licence before they can trade legally.

• Soon To Be Regulated
• Billion Dollar Industry
• Started In The USA

Payday Loan Growth Forecasts

Virtually nothing in 1990 to $27 billion in 2008...

Worldwide, the value of the payday loans sector has grown from virtually nothing in 1990 to $15 billion in 2004 and to somewhere in the region of $27 billion in 2008. More than 100 million payday loan transactions take place every year. Although concerns have been expressed in some circles about the long term sustainability of the business model, most commentators expect payday loan businesses to continue to grow, albeit at a slower rate than in previous years. If unemployment rises significantly, payday loan providers are likely to get squeezed because an increasing number of their customers will have no option but to default on their loans.