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Consumer Borrowing after Cash Advance Bans

Consumer Borrowing after Cash Advance Bans

Government Book Board

Stanford Legislation Class


High-interest payday loans have actually proliferated in the past few years; therefore have efforts to too control them. Yet just exactly how borrowers react to such laws continues to be mainly unknown. Drawing on both administrative and study information, we exploit variation in payday-lending rules to examine the end result of cash advance limitations on customer borrowing. We realize that although such policies work at reducing payday financing, customers react by moving with other types of high-interest credit (as an example, pawnshop loans) in the place of old-fashioned credit instruments (for instance, bank cards). Such moving exists, but less pronounced, for the payday that is lowest-income customers. Our effects claim that policies that target payday lending in isolation might feel inadequate at reducing people’ reliance on high-interest credit.

1. Introduction

The payday-lending industry has gotten extensive attention and intense scrutiny in the past few years. Read the rest of this entry »