Using our estimates the cost for this service is less than $2.35 a day. To arrive at this number we take the average loan of $325 multiplied by 31%* and adjust for loan losses (principal and fees lost due to loan defaults) to arrive at an average monthly cost for loans outstanding. If you prefer to use the distorted CRL and press data their number works out to less than $4.00 a day.
This transaction is for an extension of credit to many who have no other "legitimate" choice and who's only collateral is a check that may or may not be good when it is written. Where would these customers turn if this option were not available? We have our suspicions, but CRL and the press do not say.
Further, most jurisdictions in Alabama will not process charges against someone for defaulting on a payday advance check. Therefore, there is virtually no means of criminal enforcement for collections as with banks and merchants. And, as a general rule these transactions go unreported to credit bureaus and have no impact on a customers credit. Therefore, the risk of default and loss of the entire amount advanced is a significant factor.
* 31% is based on the average term of a loan to be 17 days. State law allows for loans to be no less than 10 days and no longer than 31. 17 days is an estimate since many loans are made for 31 days in lieu of a more common 14 days. The 31% is an aggregated monthly average.