Get a load of this. A California bank offering a payday alternative bites the dust. It’s unfortunate because I think competition is good. I wish their model was sustainable.
What does not get enough press is that 20-30% of borrowers default on their loans. This is the primary reason payday loans are expensive. Payday lending is just like any other business. The losses need to get spread out or you lose money.
This article was in the American Banker: “California Thrift’s Woes Show Challenges Competing with Payday Lenders.” Here are the highlights:
One PacificCoast Bank in Oakland, Calif., is regrouping as it looks to battle payday lenders in the San Francisco Bay area.
The $282 million-asset thrift recently pulled the plug on its One Pac Pal loan, which it tailored to offer low-income clients short-term credit at reasonable rates and terms. The program, which began 18 months earlier, lost too much money, says Kat Taylor, One PacificCoast’s chief executive.
“We have not yet found an economically sustainable product that’s sufficient to save enough people” from payday lenders, she says.
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