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The effects of disclosure and enforcement on payday lending in Texas

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  • Wang, Jialan
  • Burke, Kathleen

Abstract

In 2012, Texas and two municipalities therein adopted regulations governing the payday loan market. Austin and Dallas enacted supply restrictions limiting the loan-to-income ratio and mandating amortization. The state adopted an information disclosure inspired by Bertrand and Morse (2011) presenting the cost and typical usage of payday loans in easy-to-understand terms. We find that the municipal restrictions led to a 61% decline in loan volume in Austin and a 44% decline in Dallas, with the effects driven by the start of enforcement. The statewide disclosures led to a persistent 12% decline in loan volume in the first six months.

Suggested Citation

  • Wang, Jialan & Burke, Kathleen, 2022. "The effects of disclosure and enforcement on payday lending in Texas," Journal of Financial Economics, Elsevier, vol. 145(2), pages 489-507.
    • Handle: RePEc:eee:jfinec:v:145:y:2022:i:2:p:489-507
    DOI: 10.1016/j.jfineco.2021.09.024
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    References listed on IDEAS

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    Cited by:

    1. Julia Fonseca, 2023. "Less Mainstream Credit, More Payday Borrowing? Evidence from Debt Collection Restrictions," Journal of Finance, American Finance Association, vol. 78(1), pages 63-103, February.
    2. Zachary Bethune & Joaquín Saldain & Eric R. Young, 2024. "Consumer Credit Regulation and Lender Market Power," Staff Working Papers 24-36, Bank of Canada.

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    More about this item

    Keywords

    Payday lending; Disclosure; Financial regulation; Enforcement;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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