TY - JOUR
T1 - Consumer borrowing after payday loan bans
AU - Bhutta, Neil
AU - Goldin, Jacob
AU - Homonoff, Tatiana
N1 - Publisher Copyright:
© 2016 by The University of Chicago. All rights reserved.
PY - 2016/2
Y1 - 2016/2
N2 - High-interest payday loans have proliferated in recent years; so too have efforts to regulate them. Yet how borrowers respond to such regulations remains largely unknown. Drawing on both administrative and survey data, we exploit variation in payday-lending laws to study the effect of payday loan restrictions on consumer borrowing. We find that although such policies are effective at reducing payday lending, consumers respond by shifting to other forms of high-interest credit (for example, pawnshop loans) rather than traditional credit instruments (for example, credit cards). Such shifting is present, but less pronounced, for the lowest-income payday loan users. Our results suggest that policies that target payday lending in isolation may be ineffective at reducing consumers’ reliance on high-interest credit.
AB - High-interest payday loans have proliferated in recent years; so too have efforts to regulate them. Yet how borrowers respond to such regulations remains largely unknown. Drawing on both administrative and survey data, we exploit variation in payday-lending laws to study the effect of payday loan restrictions on consumer borrowing. We find that although such policies are effective at reducing payday lending, consumers respond by shifting to other forms of high-interest credit (for example, pawnshop loans) rather than traditional credit instruments (for example, credit cards). Such shifting is present, but less pronounced, for the lowest-income payday loan users. Our results suggest that policies that target payday lending in isolation may be ineffective at reducing consumers’ reliance on high-interest credit.
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U2 - 10.1086/686033
DO - 10.1086/686033
M3 - Article
AN - SCOPUS:84984831765
SN - 0022-2186
VL - 59
SP - 225
EP - 259
JO - Journal of Law and Economics
JF - Journal of Law and Economics
IS - 1
ER -