Dispelling Common Myths: The Facts About Restrictive Rate Caps
Dispelling Common Myths
MYTH: Advance America could still operate profitably if they charged a much smaller APR.
FACT: Some of our critics have proposed capping interest rates for our services, but to do so would effectively ban cash advances.
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Lower fees would not generate enough income to pay for basic business expenses, such as rent, utilities and wages.
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An APR of 36 percent, as some of our critics have suggested, would mean customers pay a fee of $1.38 per $100 borrowed, or less than 10 cents per day for a two-week loan.
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No market-based provider - not a credit union, not a bank - can lend a short-term loan at that rate without being subsidized. Such rate cap models overlook the significant cost of operating a regulated business, and would be an effective ban on cash advances.
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Our customers recognize that the price of the one-time fee is appropriate for a short-term loan, relative to other options.
