Predatory Lending

Industry Profitability
Proponents' Stance and Counterarguments
In a profitability analysis by Fordham Journal of Corporate & Financial Law, it was
determined that the average profit margin from seven publicly traded payday lending
companies (including pawn shops) in the U.S. was 7.63%, and for pure payday lenders
it was 3.57%. These averages are less than those of other traditional lending institutions
such as credit unions and banks.
Comparatively the profit margin of Starbucks for the measured time period was just over
9%, and comparison lenders had an average profit margin of 13.04%. These
comparison lenders were mainstream companies: Capital One, GE Capital, HSBC,
Money Tree, and American Express Credit.
Charges Are In Line With Costs
A study by the FDIC Center for Financial Research found that "operating costs are not
that out of line with the size of advance fees" collected and that, after subtracting fixed
operating costs and "unusually high rate of default losses," payday loans "may not
necessarily yield extraordinary profits."
Page 101 of 181