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Banks and Payday Lenders: Friends or Foes?

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  • James Barth
  • Jitka Hilliard
  • John Jahera

Abstract

This paper investigates the geographic distribution of payday lenders and banks that operate throughout the United States. State-level data are used to indicate differences in the regulatory environment across the states. Given the different constrains on interest rates and other aspects of the payday loan products, we empirically examine the relationship between the number of payday lender stores and various demographic and economic characteristics. Our results indicate that number of stores is positively related to the percentage of African American population, the percentage of population that is aged 15 and under and the poverty rate. The number of stores is also negatively related to income per capita and educational levels. Copyright International Atlantic Economic Society 2015

Suggested Citation

  • James Barth & Jitka Hilliard & John Jahera, 2015. "Banks and Payday Lenders: Friends or Foes?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(2), pages 139-153, May.
    • Handle: RePEc:kap:iaecre:v:21:y:2015:i:2:p:139-153:10.1007/s11294-015-9518-z
    DOI: 10.1007/s11294-015-9518-z
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    References listed on IDEAS

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    1. Brian T. Melzer, 2011. "The Real Costs of Credit Access: Evidence from the Payday Lending Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 517-555.
    2. Bhutta, Neil, 2014. "Payday loans and consumer financial health," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 230-242.
    3. Donald P. Morgan & Michael R. Strain & Ihab Seblani, 2012. "How Payday Credit Access Affects Overdrafts and Other Outcomes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 519-531, March.
    4. Zinman, Jonathan, 2010. "Restricting consumer credit access: Household survey evidence on effects around the Oregon rate cap," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 546-556, March.
    5. Morse, Adair, 2011. "Payday lenders: Heroes or villains?," Journal of Financial Economics, Elsevier, vol. 102(1), pages 28-44, October.
    6. Michael A. Stegman & Robert Faris, 2003. "Payday Lending: A Business Model that Encourages Chronic Borrowing," Economic Development Quarterly, , vol. 17(1), pages 8-32, February.
    7. Michael A. Stegman, 2007. "Payday Lending," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 169-190, Winter.
    8. Donald P. Morgan & Michael R. Strain, 2007. "Payday holiday: how households fare after payday credit bans," Staff Reports 309, Federal Reserve Bank of New York.
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    Cited by:

    1. Craig Wesley Carpenter & Kristopher Deming & John Anders & Michael Lotspeich‐Yadao & Charles M. Tolbert & Adam Ingrao, 2024. "Do payday lending bans protect or constrain regional economies? Evidence from the Military Lending Act's final rule," Contemporary Economic Policy, Western Economic Association International, vol. 42(2), pages 319-335, April.
    2. James R. Barth & Jitka Hilliard & John S. Jahera & Kang B. Lee & Yanfei Sun, 2020. "Payday lending, crime, and bankruptcy: Is there a connection?," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(4), pages 1159-1177, December.
    3. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    4. Thomas A. Hemphill, 0. "The small-dollar loan industry: a new era of regulatory reform—and emerging competition?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 0, pages 1-11.
    5. Ian Dunham & Alec Foster, 2023. "FRINGE FINANCIAL ECOLOGIES AND PLACE‐BASED EXCLUSION: A Tale of Two Cities," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 47(6), pages 881-898, November.
    6. Thomas A. Hemphill, 2020. "The small-dollar loan industry: a new era of regulatory reform—and emerging competition?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 55(3), pages 150-160, July.
    7. Sonia Stefanizzi & Tatiana Lysova, 2024. "Usury vulnerability: measuring and modelling the phenomenon in Italy," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(4), pages 3845-3862, August.
    8. Barth, James R. & Hilliard, Jitka & Jahera, John S. & Sun, Yanfei, 2016. "Do state regulations affect payday lender concentration?," Journal of Economics and Business, Elsevier, vol. 84(C), pages 14-29.

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    More about this item

    Keywords

    Payday lending; Small loans; Credit issues; D18; G21; G23;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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