Stricter state regulation of payday lenders slows use of the loans and doesn't drive borrowers to online or out of state, says the Pew Charitable Trusts in a new report unveiled Wednesday.

The report, "Payday Lending in America: Who Borrows, Where They Borrow, and Why," is based on an in-depth survey and focus groups with hundreds of payday borrowers around the country, conducted by Pew's Safe Small-Dollar Loan Research Project.

In states with strict regulations on the short-term, small dollar loans, just 2.9% of adults say they've used a payday loan within the last five years, the report says. Meanwhile, more than 6% of adults surveyed had borrowed in states with more lenient laws.

"In states that enact strong legal protections, the result is a large net decrease in payday loan usage; borrowers are not driven to seek payday loans online or from other sources," the report says.

"Further, payday borrowing from online lenders and other sources varies only slightly among states that have payday lending stores and those that have none," it adds.

The Pew study also found that most borrowers use payday loans to cover regular, everyday expenses, despite the fact that they are often marketed as short-term loans for emergencies.

The average borrower is indebted for about five months of the year, and 69% of people say the first time they took out the loan it was to cover a recurring expense like utilities or mortgage payments or food, the report says. Only 16% said they first borrowed for an unexpected emergency like a medical expense or car repair.

The report finds that 5.5% of Americans have taken out a payday loan in the past five years. Pew estimates that on average, a borrower takes out eight loans of $375 per year and and pays $520 in interest.

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