According to the Financial Times, payday lenders and pawnshops have seen a huge increase in the amount of business due to the government shutdown that has resulted in about 800,000 people working without pay or being furloughed. These workers are turning to payday loan lenders and pawn shops to help them get through the financial difficulties of getting no paycheck while President Donald Trump and Congress fails to compromise on a deal that would re-open the government.
It’s four weeks and counting… with no real end in sight!
World Acceptance, which is based in South Carolina, saw its stock increase 22 percent. Company chief executive Chad Prashad said there is a spike in demand in the southeast U.S. and Texas – areas where government workers are working with the airports.
To help these workers, the company is offering loan deferrals without fee and interest penalties. New customers will be allowed to borrow $1,250 to be repaid in 10 months with no fees or added interest. Prashad said the company is focused on offering the communities it serves a lending hand. He said this same promotion is often available to people affected by natural disasters – tornadoes, hurricanes, etc.
EZ Corp, which has an Austin, Texas pawnshop saw its stock increase 20 percent since the government shutdown Dec. 22.
It appears investors think there will be a rise in demand for services if the government continues with its shutdown, which has become the longest to date. Capital Innovations Chief Investment Officer Michael Underhill said people are dipping into their savings and getting short-term loan liquidity to help them pay for mortgages or other things.
Democrats have been scrutinizing the payday loan industry and lenders for many years, with critics saying short-term loans are often predatory and cause years of debt for borrowers. However, 78 percent of U.S. workers live paycheck to paycheck, and that goes for government workers. For them, a payday lender may be their only recourse until the Trump administration and Congress can finally get a deal they agree on to reopen the government.
US Bank to offer small-dollar Idaho payday loans to compete with payday lenders.
The firms, which were subprime payday loan lenders from Illinois, marketed paydayand signature loans to individuals who were financially unsophisticated.