Payday lending: new research and the big question

Payday lending is controversial. In the states that allow it, payday lenders make cash loans that are typically for $500 or less that the borrower must repay or renew on his or her next payday. The finance charge for the loan is usually 15 to 20 percent of the amount advanced, so for a typical two-week loan the annual percentage interest rate is about 400 percent. In this article, the author briefly describes the payday lending business and explains why it presents challenging public policy issues. The heart of this article, however, surveys recent research that attempts to answer what the author calls the "big question," one that is fundamental to the public policy dispute: Do payday lenders, on net, exacerbate or relieve customers' financial difficulties?Payday loans ; Public policy

Financial access options for the underserved

This issue of Banking and Community Perspectives explores the features and limitations of two of the existing products and services for the financially underserved--prepaid cards and small-dollar loans.Unbanked ; Financial services industry ; Credit scoring systems

Fulfilling the Vision of Jessie Ball duPont: 2012 Annual Report

This annual report details the activities of the Jessie Ball duPont fund, including:Mission & ValuesLetter from President & Chair2012 Highlights2012 GrantmakingCelebration of 35 YearsTrustees and Staf

Off-track Betting and Its Impacts on a Rural Community

Proposals have been made to legalize an off-track betting teletrack theater in Hampden County, Massachusetts. A telephone survey of a systematic sample of 200 respondents in the town of Holyoke was conducted in order to assess the perceived impacts of such gambling activity in this location. The findings show little consensus as to the positive impacts, but much greater agreement over the negative impacts that a teletrack theater would have in the respondents\u27 town. The major factor in predicting respondents\u27 attitudes toward legalization was found to be their perception of the impact a teletrack theater would have on the character of the town. Other major factors were the perception of impact on the moral character of the town, the perceived impact on the traffic conditions on roads leading to the town, the impact of the teletrack theater on the number of jobs for local residents, and the number of adults in the respondents\u27 household

Payday Loan Choices and Consequences

High-cost consumer credit has proliferated in the past two decades, raising regulatory scrutiny. We match administrative data from a payday lender with nationally representative credit bureau files to examine the choices of payday loan applicants and assess whether payday loans help or harm borrowers. We find consumers apply for payday loans when they have limited access to mainstream credit. In addition, the weakness of payday applicants’ credit histories is severe and longstanding. Based on regression discontinuity estimates, we show that the effects of payday borrowing on credit scores and other measures of financial well-being are close to zero. We test the robustness of these null effects to many factors, including features of the local market structure

Payday Lending: New Research And The Big Question

Payday lending is controversial. In the states that allow it, payday lenders make cash loans that are typically for $500 or less, and the borrower must repay or renew the loan on his or her next payday. The finance charge for the loan is usually 15 to 20 percent of the amount advanced, so for a typical two-week loan the annual percentage interest rate is about 400 percent. This article describes the payday-lending business and explains why it presents challenging public-policy issues. It surveys recent research that attempts to answer the “big question,” one that is fundamental to the public-policy dispute: Do payday lenders, on net, exacerbate or relieve customers\u27 financial difficulties? The article argues that despite research efforts of a talented group of economists, we still don\u27t know the answer to the big question