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Consumer Borrowing after Cash Advance Bans

Federal Reserve Board

Stanford Law Class

Abstract

High-interest payday loans have actually proliferated in the last few years; therefore have efforts to too manage them. Yet exactly how borrowers answer regulations that are such mostly unknown. Drawing on both administrative and study information, we exploit variation in payday-lending guidelines to review the consequence of pay day loan limitations on customer borrowing. We realize that although such policies work well at reducing payday financing, customers react by moving to many other types of high-interest credit (as an example, pawnshop loans) in place of conventional credit instruments (for instance, bank cards). Such moving 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 attention that is widespread intense scrutiny in modern times. Continuer la lecture