The payday loan business and alternative products seem to experience stiff competition and this is evidenced from the results of our interviews and surveys on vendors. The sampled vendors reported to be charging the maximum amount allowed in the states where the business is allowed. The FIDC recently released an independent report that indicated uniformity in the industry. Claims of collusion of prices or concentration of monopolies in the payday industry are not substantiated. This may mean that customers who resort to get payday loans usually have no other choice of hence the urgency of cash is considered more important compared to the price that comes with it. Nevertheless, it may also imply that in view of the associated operational costs, payday loans are usually fairly priced.

 

Results from interviews and industry surveys show that customers who opt for payday loans usually compare the cost of a payday loan with other costs such as those of bouncing checks or getting penalized for late payment. Point in case, in the industry’s 2004 survey, 73% of the interviewed customers attributed their preference to payday advance in avoiding late charges on bills. Another 66% ranked avoidance of bounced checks as an advantage of payday loans. Price may not be the sole factor in determining the customer’s decision to acquire payday loans but it really plays a role. Advance America attributes its future profitability to the way its appealingly pricing of its products compared to bank NSF. Less than 50% of the interviewed respondents reported not to have been satisfied with the products’ fees charges. This is a clear indication that if banks can be extremely expeditious in processing loans as fast as payday lenders, the former are poised to gain from the large market out there. However, a factor that needs to be put into consideration is whether they have what it takes to do that.