The vast majority of payday loans are rolled over or quickly followed by new loans, and most people who borrow from payday lenders are recipients of government benefits, according to the Consumer Financial Protection Bureau.
The CFPB, the consumer finance regulatory agency created by the 2010 Dodd-Frank financial reform law, released new data collected in its supervision of storefront payday lenders Tuesday, including 12 million loans in 30 states.
The bureau found that people who borrow from payday lenders are return customers: More than 80 percent of payday loans are rolled over or are followed by another loan within 14 days.
Return customers make up the bulk of business, according to the CFPB: Half of all payday loans are part of a borrowing sequence that involve at least 10 consecutive loans. Most of those chains of loans, the CFPB explains, represents people "borrowing prior to receiving another paycheck after repaying the prior loan."
Another datapoint that payday lenders largely cater to a small and familiar customer base: 58 percent of monthly borrowers receive government benefits, according to the CFPB, including Supplemental Security Income or Social Security Disability Insurance. Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer.
Payday loans are small advances made without collateral, and usually involve short loan periods and high interest rates. The size of payday lending industry has soared over the past few decades, from just a few hundred in the early 1990s to 20,000 today.
The rapid growth of payday lending and its role in the finances of low-income and unbanked Americans has led Sen. Elizabeth Warren of Massachusetts, who played a key role in the formation of the CFPB, to express interest in offering simple banking services through the Postal Service.