Report Reveals How Payday Lenders Trap Borrowers in Cycle of Debt

Consumer Bureau says payday loan industry uses deception to drive reborrowing

Andy Spears
2 min readApr 16, 2022
Photo by Daniel Thomas on Unsplash

A report from the Consumer Financial Protection Bureau (CFPB) reveals that payday lenders engage in deceptive tactics in order to trap borrowers in a cycle of costly reborrowing.

The report suggests that even in states with extensive borrower protections, payday lenders are pushing consumers into high-cost loan rollovers.

“Our research suggests that state laws that require payday lenders to offer no-cost extended repayment plans are not working as intended,” said CFPB Director Rohit Chopra. “Payday lenders have a powerful incentive to protect their revenue by steering borrowers into costly re-borrowing.”

The CFPB explains the options this way:

Every year, more than 12 million borrowers take out payday loans in the 26 states where payday lending is not prohibited. Sixteen of those states require payday lenders to offer no-cost extended payment plans. A payment plan allows a borrower to repay only the principal and fees already incurred, splitting the remaining balance over several months. A borrower’s other, costlier option, if they do not repay their loan, is to rollover their loan. Essentially, a…



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .