Consumer Lending


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Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,800 consumer lending companies in the US, also known as “payday lenders”, provide unsecured short-term loans to consumers experiencing cash flow shortfalls. About 3% of all adult Americans have used a payday loan. Companies may also provide student loans and loans secured by real estate or automobiles. Some firms also provide other personal financial services, such as check cashing, money orders, and wire transfers.

Negative Public Perception

With annual interest rates of almost 400% and a customer base consisting primarily of low-income borrowers, many consumer advocates view payday loans as predatory lending that takes advantage of the working poor.

Increasing Regulation

The controversy over payday loans has led to new regulations and restrictions in some states and ongoing scrutiny by federal and state regulators.

Industry size & Structure

The average consumer lending company operates 5 storefronts with about 33 employees and has annual revenue of about $12.9 million.

    • The consumer lending industry in the US consists of about 2,800 firms with 14,300 locations, about 93,000 employees, generating about $36 billion in annual revenue.
    • About 12 million American adults use payday loans annually. On average, a borrower takes out eight loans of $375 each per year and spends $520 on interest.
    • About three-fourths of consumers obtain payday loans exclusively through storefront locations, while just over 15% use online lenders exclusively.
    • The industry is highly concentrated, with the 20 largest firms representing 75% of industry revenue.
    • Many large companies also operate pawn shops.
    • They may also operate check cashing and other personal financial services in states where regulations make payday lending unattractive.
    • Major companies include Ace Cash Express, Advance America, Cash America, Check N Go, Money Mart and QC Holdings.
                              Industry Forecast
                              Consumer Lending Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 14, 2024 - FTC Sues Dave
                              • The Federal Trade Commission (FTC) sued financial technology company Dave, accusing it of luring users to its personal finance app by advertising cash advances of up to $500 that many never receive. The FTC also alleges that the company does not make users aware upfront that it charges a fee of up to $25 to receive the cash instantly and a monthly $1 fee. Dave also collects hard-to-avoid "tips" on transactions and misrepresents that the money is used to purchase meals for children in need, the FTC said. The FTC added that Dave’s conduct violates the FTC Act and the Restore Online Shoppers’ Confidence Act.
                              • Disposable personal income, an indicator of demand for consumer lending services, increased 0.3% month over month in September 2024 while real personal consumption expenditures increased 0.5%, according to the US Commerce Department's Bureau of Economic Analysis (BEA). Real disposable personal income, what Americans make after adjusting for inflation and taxes, increased 0.1% during the period. The increase in real spending reflected an increase of 0.7% in spending on goods and an increase of 0.2% in spending on services.
                              • So-called "earned wage access" (EWA) programs, which allow workers to take a portion of their paychecks before payday, often for a fee, have grown rapidly, according to CNBC. EWA programs, which operate either directly to the consumer or through employers, may reduce demand for payday loans. In the employer-sponsored market, $9.5 billion in wages was accessed early during 2020, triple the $3.2 billion in 2018, according to Datos Insights. The number of transactions also increased threefold over that period to 55.8 million transactions from 18.6 million. High worker demand for such programs makes them a cost-effective way for businesses to retain and recruit employees, according to consultants and academics. High fees and frequent use of EWA programs can translate to an annual interest rate of more than 330%, according to experts, regulators, and consumer advocates.
                              • Consumer lending industry employment increased slightly while average wages for nonsupervisory employees increased significantly during the first nine months of 2024, according to the US Bureau of Labor Statistics. Consumer lending industry sales are forecast to grow at a 1.66% compounded annual rate from 2024 to 2028, slower than the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc.
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