Scenario

A new form of credit is growing extremely fast today online installment loan. Online installment loans have a long duration, triple-digit interest rates (200%-400%), and is geared towards working-class Americans who have not seen a growth in their wages or an increase in unpaid bills since the Recession of 2008-2009. In other words, these loans are targeted towards non-prime borrowers (i.e., borrowers who have a poor credit history, have had some sort of foreclosure, bankruptcy, short sale, late payment, etc.).

The online installment loans industry has seen a massive growth in the last five years. Non-prime borrowers now collectively owe about $50 billion on installment products. According to the firms that operate this area (Enova, Elevate Credit Inc., North Cash, etc.), these installment loans offer customers with more time to make payments and provides credit avenue to customers who have limited alternatives to borrow money, and are ineligible to get conventional loans with lower rates. The higher interest rates are justified by the fact that the non-prime borrowers are more likely to default on their loans. This situation is becoming more acute in the Covid-19 context, as several individuals seek loans to meet their ends.

However, the cost of these loans can add up. The initial payments (up to first 18 months) go exclusively towards the interest, adding up costs for customers. In addition, the governments weakening of the payday loan regulations has all the consumer advocates worried. Given that there are around 150 million Americans with a non-prime rating, this industry is not likely to stop growing.

Based on the above scenario, please answer the following question:

Are companies like Enova and Elevate Credit exploiting disadvantaged customers?

An in-depth answer on this would be extremely helpful.