Payday lending spikes amid Biden’s recession
Most want to avoid payday loans, which offer quick cash against future paychecks without a credit check and come with an interest rate above 500%. But the rapidly increasing prices of food, fuel and rent gives them few options.To predatory payday lenders, however, they signal happy days and good times ahead. “Low unemployment plus inflation generally mean consumers may need loans for additional capital to manage through unexpected spikes and expenses while earning money to pay back these loans,” said David Fisher, CEO of short-term, subprime lender Enova (ENVA) said during an earnings call in May. The company beat quarterly earnings estimates by 7.7%. Given the economic dynamics at play, Fisher said his company has “meaningfully leaned into the demand with our marketing efforts,” and spent more to attract new customers. That has paid off. About 44% of all loans were issued to new customers in the last quarter, he said. That increase in first-time borrowers came as US consumer inflation reached its highest level in more than four decades and Americans struggled to put food on their tables and gas in their tanks.Working to drive to workThe national average for a gallon of gas stands at just under $5, a 61% increase since last year. The jump comes just as many employers are requiring workers to return to in-person work. The federal minimum wage, meanwhile, still stands at $7.25 per hour, where it’s been since 2009. Low-wage workers must labor for about 14 hours to fill up their tank. About two thirds of Americans now live paycheck to paycheck, a June LendingClub survey found. That number jumps to 82% among workers earning less than $50,000. The average credit score for low-earners in the US is also dropping, according to LendingClub data. About 40% of Americans earning less than $50,000 and living paycheck to paycheck have a subprime credit score of below 650 making it difficult for them to get a loan through a traditional lending institution or to qualify for additional credit. The average …