<p>WASHINGTON – While there's been much emphasis on the burgeoning payday lending business which rakes in an estimated $2.4 billion in annual revenue, not much data has been collected on why consumers turn to payday loans for their emergency financial needs. The Consumer Federation of America (CFA) and the National Endowment of Financial Education (NEFE) are in the early phases of conducting a survey that will seek out those who use payday loans, auto title loans and other forms of post-dated transactions to find specific reasons why they turn to various forms of payday lending, said Nan Mead, NEFE director of communications. "We generally acknowledge that people who use payday lending are in dire financial straits whether it's temporary or ongoing," Mead said. "We hope to find out what's really motivating them to turn to payday loans and how are they managing their money in the meantime." Colleen Kelly, CUNA's vice president of state governmental affairs, has been an active participant in payday lending forums and recently met with CFA and NEFE officials as well as 13 other representatives including from Fannie Mae and the Federal Reserve Board to strategize on methodology, data collection and a time frame to have the survey completed. She was also recently named to the "The Debt Cycle: Using Payday Loans to Make Ends Meet" forum. Kelly said the issue has increasingly become of dire concern because pawn shops, and auto title loans outlets are setting up shop near military bases, where some members are coincidentally served by nearby credit unions. "We've been actively involved in looking for alternatives and now we can start the process of finding out why there's such a demand for these types of loans," Kelly said. The CFA/NEFE survey aims to identify circumstances that may prompt consumers to take out a payday loan, for example, if after they had been turned down for a loan by a bank, credit union or a relative. The survey also hopes to pinpoint how frequently payday loans are used – in an emergency situation, every once in a while or on a more frequent basis. Kelly said because payday-lending outlets are typically found in low-income neighborhoods, the survey will also look at demographics such as race, gender and age. Indeed, according to one state's findings, the average payday loan user is female, in her late 30s and has an average net income of $18,675. Roughly 66% are renters versus paying a mortgage. Payday loan users will also be questioned on how they plan to pay back the loan, which typically has to be paid back in full by the end of a two-week period, or interest can quickly accumulate. Data will also be collected on whether users really understand the fees involved to initiate a payday loan and where users turned for help when the loans weren't available more than ten years ago. While the aim is to gather as much information to produce a full report, Kelly admits the challenge will be finding people who are willing to be surveyed. "Through share draft data, we can identify members who have used payday loans but because of privacy regulations we can not share that information," Kelly said. "The challenge with the survey is that some people may not want to share personal information on their financial situations." Mead added that discussion would continue among the 16 representative organizations and federal agencies on ways to help loan recipients feel comfortable about talking. She also said the hope is that the findings will help identify alternatives to payday lending outlets, which continue to come under much scrutiny from consumer groups for the "exorbitant" interest rates that are attached to payday loans. Based on the data collected, Mead said educational programs that teach users the basics and ramifications of securing a payday loan might also be implemented. CUNA continues to monitor 19 payday lending bills in 14 states that seek to make rollovers legal, reduce penalty fees and place strict licensing regulations on payday lending transactions rather than cap interest rate caps, Kelly said. Meanwhile, credit unions continue to make strides in offering alternatives. State Employees Credit Union in North Carolina offers its Salary Advance, which allows members to apply for a $500 line of credit at an 11.75% interest rate. Over a two-week payroll period, the interest paid on $500 totals $2.50 compared to more than $40 for a payday loan through a check casher, said Jim Blaine, SECU's president. Earlier this month, Day-Air Credit Union and Wright-Patt Credit Union met to put together a business plan for a CUSO that would provide loans similar to payday loans and cash checks for members and others charging less fees and lower interest rates (CU Times, March 13). CUNA President and CEO Dan Mica along with 250 other community lenders and advocacy groups recently endorsed a letter to the Federal Reserve Board urging the agency to take a strong stance against all forms of predatory lending, particularly the banning of single-premium credit insurance fees. "Credit unions ought to be commended for the different approaches they've taken to combat predatory lending," Mead said. They've take the lead." -</p> <p>[email protected]</p>