Gregory Elliehausen of the Board of Governors of the Federal Reserve system recently produced a telling payday loan report entitled “An Analysis of Consumers’ Use of Payday Loans.” This report gives us a glimpse into the demographic characteristics of payday loan customers and shows us some of the key factors that go into the decision-making process of whether to use the loan product for emergency cash. For a convenient synopsis, consider the Payday Pundit’s outline here.

Payday loans: a cure, not an epidemic

This cutting edge payday lending study proves through survey data of payday loan customers that lenders provide “a desired service to lower and moderate income, middle-educated, young American families.” Unlike the bleating cries of those who criticize the industry – who claim that there’s a payday loan addict around every corner – Elliehausen clearly and non-judgmentally shows that only two percent of U.S. adults use payday loans at any one time.

Elliehausen makes it quite clear

Here’s a sampling of what is known about cash advance customers:

• Sixty-three percent of customers are the heads of young families
• Only 10 percent are 65 or older, indicating that the elderly are not being exploited or targeted as most critics claim
• Customers typically have “lower and middle incomes”; 41 percent earn $25,000 to $50,000 per year, while 39 percent earn $40,000 or more
• Higher income payday loan customers (those who earn above $50,000) make up a larger share than those in the lower bracket ($15,000 or less). This refutes the idea that the poor and destitute are being “targeted”
• Ninety percent of customers have a high school diploma or better, while 54 percent have attended college or have a higher education degree
• General indications are that payday loan customers have limited access to credit, yet still use payday loans sparingly
• A whopping “eighty-one percent of customers recalled receiving information on the annual percentage rate for their loan” and were aware of overall costs
• Even more telling, 86 percent of no fax payday loan customers said that the product was a “useful service”

Politicians, leave the payday loan alone… respect your constituency

Past academic studies have shown that the payday loan benefits consumers, and that taking them away leads to a decrease in financial well-being. Elliehausen’s study concludes that

In giving consumers access to additional credit for unexpected expenses or shortfalls in income, payday loans give the consumers a little control over their financial situations that they otherwise would not have.

A payday loan is a tool, a bridge and a temporary cure. Limiting consumer options by taking them away makes no sense in a society that values the abilities and opinions of its people.

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