Fun With Numbers
Dave Stokes pointed me to an interesting source of information on payday lending in Missouri. Because I’ve written before about this topic, I thought that I would share some key facts about the Missouri payday loan industry.
- During 2006, Missouri payday lenders issued approximately 2.87 million loans (including renewals).
- The average loan size was $274.72 and the average annual interest rate on loans was 422.26 percent.
- Borrowers paid $39.05 on average in interest and fees on their loans.
- The number of payday loan licenses (establishments) in Missouri versus neighboring states is as follows (ranked by my per-capita calculation):
| State | Licenses | Population | Per capita (in basis points) |
| Tennessee | 1,459 | 5,689,283 | 2.56 |
| Missouri | 1,286 | 5,595,211 | 2.30 |
| Kentucky | 757 | 4,041,769 | 1.87 |
| Kansas | 396 | 2,688,418 | 1.47 |
| Nebraska | 200 | 1,711,263 | 1.17 |
| Oklahoma | 399 | 3,450,654 | 1.16 |
| Arkansas | 280 | 2,673,400 | 1.05 |
| Illinois | 1,140 | 12,419,293 | 0.92 |
| Iowa | 259 | 2,926,324 | 0.89 |
Before readers are outraged at the interest rates being charged on such loans, it’s worth considering the annual interest charged on other consumer products. The perfect example is late fees on video rentals. For example, despite the fact that Blockbuster advertises a “no late fee” policy, the company in fact charges a $1.50 restocking fee for rentals more than eight days past due. If you consider an average rental cost of $5, this restocking fee would translate into a simple interest rate of 1,369 percent if expressed as an annual rate (assuming no compounding). But nobody accuses Blockbuster of being usurious.
Just some food for thought.
