Does access to high-interest credit (payday loans) exacerbate or mitigate individual financial distress. Using natural disasters as an exogenous shock, I apply a propensity score-matched, ...triple-difference specification to identify a causal relation between welfare and access to credit. California foreclosures increase by 4.5 units per 1,000 homes after a natural disaster. The existence of payday lenders mitigates 1.0–1.3 of them, with the caveat that not all payday loans are for emergency distress. Payday lenders also mitigate larcenies (but not burglaries or vehicle thefts). In a placebo test of disasters covered by homeowner insurance, payday lending has no mitigation effect.
In 2012, Texas and two municipalities therein adopted regulations governing the payday loan market. Austin and Dallas enacted supply restrictions limiting the loan-to-income ratio and mandating ...amortization. The state adopted an information disclosure inspired by Bertrand and Morse (2011) presenting the cost and typical usage of payday loans in easy-to-understand terms. We find that the municipal restrictions led to a 61% decline in loan volume in Austin and a 44% decline in Dallas, with the effects driven by the start of enforcement. The statewide disclosures led to a persistent 12% decline in loan volume in the first six months.
Payday Loan Choices and Consequences BHUTTA, NEIL; SKIBA, PAIGE MARTA; TOBACMAN, JEREMY
Journal of money, credit and banking,
March-April 2015, Letnik:
47, Številka:
2-3
Journal Article
Recenzirano
High-cost consumer credit has proliferated in the past two decades, raising regulatory scrutiny. We match administrative data from a payday lender with nationally representative credit bureau files ...to examine the choices of payday loan applicants and assess whether payday loans help or harm borrowers. We find consumers apply for payday loans when they have limited access to mainstream credit. In addition, the weakness of payday applicants' credit histories is severe and longstanding. Based on regression discontinuity estimates, we show that the effects of payday borrowing on credit scores and other measures of financial well-being are close to zero. We test the robustness of these null effects to many factors, including features of the local market structure.
Critical social scientific research holds that credit-debt is a principal economic and governing relation in contemporary economy and society, but largely neglects money's role in indebted life. ...Drawing on qualitative research in the payday loan market in the United Kingdom, the paper shows that borrowers typically relate to loans in monetary rather than financial terms and incorporate them into practices of payment, spending and online banking. To analyse how indebted life is variously experienced and enacted through money, the concept of money culture is developed to refer to money's culture, money's meanings and money's affects. Borrowers enter into and negotiate payday loans through a digitally mediated money culture that both mobilizes and runs counter to money's powerful fictions as circulating universal equivalent and calculative means of account.
Following a negative service experience, existing studies assert that consumers attribute blame either internally (self-blame) or externally (other-blame) with little indication that the attribution ...ever changes. This study explores blame to discover whether there are changes in attribution, specifically whether it may shift from self to other. Analysing qualitative data from borrowers in the payday lending market using I-/They-poems, this study finds firstly that blame oscillates between self and other and, secondly, that payday borrowers practice counterfactual thinking to alleviate negative emotions, which in turn prompts this blame oscillation. In revealing that blame attribution can act as a pendulum oscillating between self and other, this study makes a critical advance to existing blame research. The study also supports previous studies in I-/They-poems in uncovering novel insights into consumer theory. Evidence also emerges that the neoliberal view of the ‘empowered consumer’ interacts with the more traditional, organisation-oriented perspective, as from a consumer behaviour perspective, the attempts to improve psychological well-being and the oscillation of blame contribute to shifts in the perceived power in the loan market.
Citing consumer protection concerns, several states have recently enacted interest rate caps on small loans. After cataloguing the history of such legislation, we test whether these laws caused a ...decrease in the number of payday-lending establishments and subsequently prompted variation on incidence of bankruptcy filings. To motivate a causal interpretation of our estimates, we create a synthetic control that serves as a counterfactual from which we estimate the aggregate treatment effect of these interest rate ceilings. Importantly, we estimate the treatment effect for each period after the imposition of the cap, yielding novel insights about the dynamic heterogeneity in the relationship between payday-loan access and bankruptcy. Our results show payday-lending establishments drop by approximately 100%–a banishment of the industry. We find no short-run or long-run effects of these bans on bankruptcy. The range of our estimates allows us to rule out magnitudes that were documented in several previous studies.
Banks have financially supported payday lenders for decades. In this article I qualitatively demonstrate how these financial relationships have reinforced and expanded a bifurcated consumer credit ...market, and why these relationships matter for consumer access to financial services. I use archival financial documents from publicly traded payday lending companies between 1996 and 2014, available through the Securities and Exchange Commission, to construct the bank‐payday lender network and reveal motivations for these financial relationships. I find that bank‐payday lender relationships are sustained over many years, and that these relationships are mutually beneficial, enabling payday lender expansion and providing a way for banks to quietly profit from high‐interest lending in the face of other regulatory constraints. Further, I show that these relationships have significantly reshaped the consumer credit market over the past two decades. I conclude by considering broader implications of symbiotic institutional relationships in contemporary markets.
Payday lenders and premature mortality Agnew, Megan; Bea, Megan Doherty; Friedline, Terri
Frontiers in public health,
10/2022, Letnik:
10
Journal Article
Recenzirano
Odprti dostop
Relationships between debt and poor health are worrisome as access to expensive credit expands and population health worsens along certain metrics. We focus on payday lenders as one type of expensive ...credit and investigate the spatial relationships between lender storefronts and premature mortality rates. We combine causes of death data from the Centers for Disease Control and Prevention (CDC) and payday lender locations at the county-level in the United States between 2000 and 2017. After accounting for county socioeconomic and demographic characteristics, the local presence of payday lenders is associated with an increased incidence risk of all-cause and specific-cause premature mortality. State regulations may attenuate these relationships, which provides insights on policy strategies to mitigate health impacts.
The annualized interest rate for a payday loan often exceeds 10 times that of a typical credit card, yet this market grew immensely in the 1990s and 2000s, elevating concerns about the risk payday ...loans pose to consumers and whether payday lenders target minority neighborhoods. This paper employs individual credit record data, and Census data on payday lender store locations, to assess these concerns. Taking advantage of several state law changes since 2006 and, following previous work, within-state-year differences in access arising from proximity to states that allow payday loans, I find little to no effect of payday loans on credit scores, new delinquencies, or the likelihood of overdrawing credit lines. The analysis also indicates that neighborhood racial composition has little influence on payday lender store locations conditional on income, wealth and demographic characteristics.
The payday lending industry has been the subject of controversy over the years. This is largely due to the high fee structure of payday loans and the view of some that the industry targets ...economically vulnerable groups. For these reasons, some states prohibit payday lending, while others impose regulatory restrictions on their operations. Despite the prohibitions and restrictions, the industry nonetheless serves a significant segment of the U.S. population. Our purpose is to determine whether in addition to providing loans to individuals, access to payday lenders is associated with less property crime and fewer bankruptcies. Using a unique data set obtained directly from all state regulatory authorities, we find evidence, contrary to some earlier studies, that the presence of payday lenders may help reduce property crime as well as personal bankruptcies.
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