This paper's findings highlight that the lack of underwriting for payday loans creates economic distress for borrowers from the very first loan:
- Nearly half of all payday borrowers defaulted within two years of their first loan.
- Of borrowers who defaulted, nearly half did so within the first two payday loans.
- Default does not necessarily signal the end of payday borrowing, with many defaulters going on to repay their loan and even borrow (and possibly default) again at a later date.
- Nearly one in five borrowers had a loan charged off by the lender.
- One-third of payday borrowers experienced at least one invisible default in which their account was overdrawn on the same day that they made a payment to a payday lender.
- For payday borrowers, overdrafts and bounced transactions frequently occurred close in time to the use of payday loans. Nearly half of payday borrowers incurred an overdraft or NSF fee in the two weeks after a payday loan transaction, and 64% paid overdraft or NSF fees at some point.