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 manage them. Yet exactly how borrowers react to such laws stays mainly unknown. Drawing on both administrative and study information, we exploit variation in payday-lending legislation to examine the consequence of pay day loan restrictions on customer borrowing. We discover that although such policies work at reducing lending that is payday customers react by moving with other kinds of high-interest credit (for example, pawnshop loans) as opposed to old-fashioned credit instruments (as an example, bank cards). Continue reading