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.
Lower fees would not generate enough income to pay for basic business expenses, such as rent, utilities and wages.
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.
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.
Our customers recognize that the price of the one-time fee is appropriate for a short-term loan, relative to other options.