> You have to provide a pay stub, and a post-dated check, and the money just gets taken out on the day of.
That doesn't prevent missing payments; if it did, the risk profile on payday loans would be much different than it is and the costs would be much lower, in line with other, lower-risk, loans that exist in the market. There are several reasons why it is possible to miss the expected payment even with the paystub + postdated check approach.
(1) There's no guarantee that the next paycheck will be the same size as the previous one, particularly with the population (largely not salaried, often without paid leave available, and often with little job security) that needs payday loans.
(2) There's no guarantee that someone else won't reach into the account and take money before the payday lender gets it (including the bank itself, which absolutely will beat anyone presenting a check if there are fees, etc., due.)
(3) Its possible to cash/deposit paychecks other places than the account on which the postdated check is drawn, and people might do so if they have another unexpected expense, and decide paying that is more important than paying the loan.
That doesn't prevent missing payments; if it did, the risk profile on payday loans would be much different than it is and the costs would be much lower, in line with other, lower-risk, loans that exist in the market. There are several reasons why it is possible to miss the expected payment even with the paystub + postdated check approach.
(1) There's no guarantee that the next paycheck will be the same size as the previous one, particularly with the population (largely not salaried, often without paid leave available, and often with little job security) that needs payday loans.
(2) There's no guarantee that someone else won't reach into the account and take money before the payday lender gets it (including the bank itself, which absolutely will beat anyone presenting a check if there are fees, etc., due.)
(3) Its possible to cash/deposit paychecks other places than the account on which the postdated check is drawn, and people might do so if they have another unexpected expense, and decide paying that is more important than paying the loan.