Payday loans
The Predatory Lending Association is a spoof web site (or IS it?). Their motto is: “Helping payday lenders extract maximum profit from the working poor”.
And extract they do! Advance America offers loans with APRs as high as 495 percent. My experience as a lender on Prosper, and as an owner of junk bonds, gives me a certain amount of sympathy towards lenders. 495 percent sounds pretty good. Can I get some of that action? As a lender, not as a borrower.
Here is a quick comparison between a payday lender and a regular bank:
| Company | Advance America | Bank of America |
| Ticker | AEA | BAC |
| Dividend yield | 5.68% | 5.77% |
| Price/earnings | 11.30 | 10.20 |
| Price/cash flow | 9.40 | 9.90 |
I’d have to say that payday lending, from an investor’s point of view, is comparable to banking. The outrageous fees are offset by lower volume, higher expenses, and higher default rates. Of these two, I’d rather own some BAC because I figure AEA has more regulatory risk.