Despite a dozen studies, the welfare effects of payday credit are still debatable. We contribute new evidence to the debate by studying how payday credit access affects bank overdrafts (such as returned checks), bankruptcy, and household complaints against lenders and debt collectors.We find some evidence that Chapter 13 bankruptcy rates decrease after payday credit bans, but where we find that, we also find that complaints against lenders and debt collectors increase. The welfare implications of these offsetting movements are unclear. Our most robust finding is that returned check numbers and overdraft fee income at banks increase after payday credit bans. Bouncing a check may cost more than a payday loan, so this finding suggests that payday credit access helps households avoid costlier alternatives. While our findings obviously do not settle the welfare debate over payday lending, we hope they resolve it to some extent it by illuminating how households rearrange their financial affairs when payday loan supply changes.
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Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.
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Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.
Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.