Payday loans often trap consumers in a cycle of debt, a new report by the federal government finds.

The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees — not including loan principal. A quarter of borrowers paid $781 or more in fees.


“There is high sustained use — which we consider to be not only when a consumer rolls over the loan, but also when he pays it off and returns very quickly to take out another one,” Richard Cordray, director of the bureau, said in a conference call with reporters Tuesday.

Although the loans are often marketed as temporary, to be repaid in a single pay cycle, the report found that the median number of days a borrower remained indebted was 155. The report also said that it considers so-called deposit advances — offered by certain major banks, including Wells Fargo & Co. in San Francisco — to be essentially the same as payday loans.


“What we found is there is not much difference, from the consumer’s perspective, between payday loans and deposit advance loans,” Cordray said. “They have similar purposes and, as it turns out, similar usage by consumers.”

The Community Financial Services Assn. of America, which represents the payday loan industry, said in a statement that it took consumer protection seriously but that the loans provide an essential service.


“In our current economy and constricted credit market, consumers need access to credit to deal with periodic and unexpected financial challenges,” Dennis Shaul, chief executive of the group, said in the statement.

alejandro.lazo@latimes.com