Without proper due diligence and involvement of the bank in the loan, this is not banking. Let's step back a moment and look at what's happening in this market. Payday lending is a growing business. Nationally, according to a recent investment advisory report, the payday loan industry has grown from a few hundred outlets in the mid-1990s to approximately 10,000 nationwide. At least three different publicly traded companies engaged in the payday lending or cash advance business and, at present, they appear to have strong prospects.
Prospects appear positive for payday lenders right here in the state of California.
My fellow speaker tonight, State Treasurer Philip Angelides, recently noted that California has the greatest gap between rich and poor of all but four states in the country. Californians below the poverty line grew by 28 percent between 1989 and 1996, increasing the number of potential payday borrowers. Since 1997, when legislation favorable to the industry was passed in the state, more than 3,500 payday lending outlets have opened accounting for as much as one-third of all payday lending outlets in the country as a whole. More are likely. Clearly the industry has tapped into a real need for short-term, small dollar denomination credit.