America’s middle class is addicted to a new kind of credit

Bloomberg

The payday-loan business was in decline. Regulators were circling, storefronts were vanishing and investors were abandoning the industry’s biggest companies en masse.
And yet today, just a few years later, many of the same subprime lenders that specialised in the debt are promoting an almost equally onerous type of credit.
It’s called the online installment loan, a form of debt with much longer maturities but often the same sort of crippling, triple-digit interest rates.
If the payday loan’s target audience is the nation’s poor, then the installment loan is geared to all those working-class Americans who have seen their wages stagnate and unpaid bills pile up in the years since the Great Recession.
In just a span of five years, online installment loans have gone from being a relatively niche offering to a red-hot industry. Subprime borrowers now collectively owe about $50 billion on installment products, according to credit reporting firm TransUnion.
In the process, they’re helping transform the way that a large swathe of the country accesses debt. And they have done so without attracting the kind of public and regulatory backlash that hounded the payday loan.
“Installment loans are a cash cow for creditors, but a devastating cost to borrowers,” said Margot Saunders, senior counsel for the National Consumer Law Center, a nonprofit advocacy group.
For many families struggling with rising costs and stagnant wages, it’s a cost they’re increasingly willing to bear.
In the decade through 2018, average household incomes for those with a high school diploma have risen about 15%, to roughly $46,000, according to the latest US Census Bureau data available.
For many payday lenders credit was an opportunity to reinvent themselves.