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Consumer Borrowing after Cash Advance Bans

Consumer Borrowing after Cash Advance Bans

Federal Reserve Board

Stanford Law Class

Abstract

High-interest payday loans have actually proliferated in the past few years; therefore too have efforts to control them. Yet just how borrowers react to regulations that are such mostly unknown. Drawing on both administrative and survey information, we exploit variation in payday-lending laws and regulations to analyze the result of pay day loan restrictions on customer borrowing. We realize that although such policies work well at reducing lending that is payday customers react by moving to many other types of high-interest credit (as an example, pawnshop loans) as opposed to old-fashioned credit instruments (for instance, bank cards). Such shifting exists, but less pronounced, for the lowest-income cash advance users. Our outcomes claim that policies that target payday financing in isolation may be inadequate at reducing customers’ reliance on high-interest credit.

1. Introduction

The payday-lending industry has gotten extensive attention and intense scrutiny in the last few years. Payday loans—so called because that loan is normally due in the date regarding the borrower’s paycheck—are that is next pricey. Continue reading ‚Consumer Borrowing after Cash Advance Bans‘

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