Case 8 Cash Connection Are Its Payday Lender Strategy and Its Business Model Ethical overview

Case 8 Cash Connection Are Its Payday Lender Strategy and Its Business Model Ethical overview

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Case 8: Cash Connection: Are Its Payday Lender Strategy and Its Business Model  Ethical? Cash Connection: Are Its Payday Lender Strategy and Its Business Model Ethical? Overview The payday advance service, which issues short-term cash lending to borrowers, emerged in the early 1990s, and grew as a result of robust consumer demand and changing conditions in the financial services marketplace. A number of changes in the marketplace prompted growth, including: 1. The exiting of traditional financial institutions from the small-denomination, short-term credit market; a change largely due to its high cost structure. 2. The soaring cost of bounced checks and overdraft protection fees, late bill payment penalties, and other informal extensions of short-term credit. Today, industry analysts estimate that more than 22,000 payday advance locations across the United States extend about $40 billion in short-term credit to millions of middle-class households that experience cash-flow shortfalls between paydays. This number is higher than the 9,500 banks located throughout the United States.
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This note was uploaded on 02/23/2012 for the course MGMT 6359 taught by Professor Wang during the Fall '11 term at University of Houston-Victoria.

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