@neveroptedin In federal data, 82% of payday loans were renewed within 14 days of payoff. Have you ever paid one off and borrowed again? #paydayloans #l... See more
The claim
In its March 2014 Data Point: Payday Lending report — based on storefront lender data covering 12-month windows in 2011 and 2012 — the CFPB found that under its "new borrower" sample the median number of loans was six over an 11-month period, and that 82% of payday loans were renewed (rolled over or followed by another loan) within 14 days of repayment of the prior loan.
The receipt
Over all states in the sample, 82% of loans are renewed within fourteen days, and this percentage varies by only three percentage points across the three groups of states.
We use the term "renewal" to describe both paying additional fees to roll over a loan and re-borrowing within a given time period after repaying a loan.
It shows that the majority (64%) of new borrowers become renewers.
The "new borrower" approach, which tends to exclude borrowers in very long sequences, leads to a median number of loans of six over an 11-month period; the "all borrowers" approach gives a median number of six loans over a year, which includes borrowers who enter the data late in the time period.
What the numbers don't say
This is a research report, not a rule. The data covers storefront payday lenders in 12-month windows in 2011 and 2012, so it's a historical benchmark, not a current market figure. "Renewed within 14 days" is measured from repayment of the previous loan, and the median of six loans comes from the report's "new borrower" approach specifically.
What to take from it
The report measures a pattern; it doesn't give consumers guidance, so this page doesn't either. What it does show is how the report defines "renewal" — worth knowing if you compare it with other statistics you see quoted.
Consumer info, not financial advice.