IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp17248.html
   My bibliography  Save this paper

The Effects of Utility Shutoff and Eviction Moratoria during the COVID-19 Pandemic on the Use of Alternative Financial Services Loans

Author

Listed:
  • Andre, Jennifer

    (Urban Institute)

  • Braga, Breno

    (Urban Institute)

  • Martinchek, Kassandra

    (Urban Institute)

  • McKernan, Signe-Mary

    (Urban Institute)

Abstract

To protect financially distressed families during the COVID-19 pandemic, states implemented emergency measures such as moratoria on evictions and utility shutoffs. These policies prevented utility companies from disconnecting families' energy and water and landlords from obtaining court-ordered evictions for non-payment. Without these protections, consumers might have turned more often to high-cost alternative financial service (AFS) loans – such as payday loans - to pay their utility bills and rent. Using a random sample of 5 million consumers, we investigate whether moratoria on evictions and utility shutoffs impacted consumers' AFS use. Adults in states with an eviction or utility shutoff moratorium were less likely to borrow from high-cost non-banking institutions. Residents of high-poverty and Hispanic neighborhoods benefited the most from these protections. These results suggest that with such protections, families did not have to turn as often to high-cost loans to ensure access to housing and energy during financial distress.

Suggested Citation

  • Andre, Jennifer & Braga, Breno & Martinchek, Kassandra & McKernan, Signe-Mary, 2024. "The Effects of Utility Shutoff and Eviction Moratoria during the COVID-19 Pandemic on the Use of Alternative Financial Services Loans," IZA Discussion Papers 17248, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17248
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp17248.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cicala, Steve, 2021. "The incidence of extreme economic stress: Evidence from utility disconnections," Journal of Public Economics, Elsevier, vol. 200(C).
    2. Paige Marta Skiba & Jeremy Tobacman, 2019. "Do Payday Loans Cause Bankruptcy?," Journal of Law and Economics, University of Chicago Press, vol. 62(3), pages 485-519.
    3. Anne Fitzpatrick & Katie Fitzpatrick, 2021. "Health insurance transitions and use of fringe banks: Evidence from the Affordable Care Act," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 557-572, July.
    4. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    5. Goodstein, Ryan M. & Rhine, Sherrie L.W., 2017. "The effects of bank and nonbank provider locations on household use of financial transaction services," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 91-107.
    6. 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.
    7. McKernan, Signe-Mary & Ratcliffe, Caroline & Kuehn, Daniel, 2013. "Prohibitions, price caps, and disclosures: A look at state policies and alternative financial product use," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 207-223.
    8. Sarah Miller & Cindy K Soo, 2021. "Do Neighborhoods Affect the Credit Market Decisions of Low-Income Borrowers? Evidence from the Moving to Opportunity Experiment [Asset prices under habit formation and catching up with the Joneses]," The Review of Financial Studies, Society for Financial Studies, vol. 34(2), pages 827-863.
    9. Lucie Schmidt & Lara D. Shore-Sheppard & Tara Watson, 2020. "The Impact of the ACA Medicaid Expansion on Disability Program Applications," American Journal of Health Economics, University of Chicago Press, vol. 6(4), pages 444-476.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hannon, Simona, 2024. "Essays on consumer finance," Other publications TiSEM 4958b451-b30a-4957-9763-1, Tilburg University, School of Economics and Management.
    2. Fitzpatrick, Katie, 2024. "Non-bank credit and food hardship: The association between payday loans, pawn loans, rent-to-own contracts and food hardship in households with children," Children and Youth Services Review, Elsevier, vol. 157(C).
    3. Shihan Xie & Victoria Wenxin Xie & Xu Zhang, 2024. "Extreme Weather and Low-Income Household Finance: Evidence from Payday Loans," Staff Working Papers 24-1, Bank of Canada.
    4. Yidi Liu & Xin Li & Zhiqiang (Eric) Zheng, 2024. "Consequences of China’s 2018 Online Lending Regulation and the Promise of PolicyTech," Information Systems Research, INFORMS, vol. 35(3), pages 1235-1256, September.
    5. Lindsey Rose Bullinger, 2021. "Child Support and the Affordable Care Act's Medicaid Expansions," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(1), pages 42-77, January.
    6. Patricia D. Posey, 2023. "Information Inequality: How Race and Financial Access Reflect the Information Needs of Lower-Income Individuals," The ANNALS of the American Academy of Political and Social Science, , vol. 707(1), pages 125-141, May.
    7. Andre, Jennifer & Braga, Breno & Martinchek, Kassandra & McKernan, Signe-Mary, 2024. "The effects of state utility shutoff moratoria on credit delinquencies during the COVID-19 pandemic," Journal of Economics and Business, Elsevier, vol. 129(C).
    8. Lucie Schmidt & Lara Shore-Sheppard & Tara Watson, 2019. "The Impact of Expanding Public Health Insurance on Safety Net Program Participation: Evidence from the ACA Medicaid Expansion," NBER Working Papers 26504, National Bureau of Economic Research, Inc.
    9. Christa N. Gibbs & Benedict Guttman-Kenney & Donghoon Lee & Scott Nelson & Wilbert Van der Klaauw & Jialan Wang, 2024. "Consumer Credit Reporting Data," Staff Reports 1114, Federal Reserve Bank of New York.
    10. Megan Doherty Bea & K. Bley, 2022. "(Un)conditional consumer protections in high‐cost lending regulation: Impacts on local lending geographies," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(4), pages 1561-1596, December.
    11. Lodermeier, Alison, 2024. "Credit access and housing insecurity: Evidence from winter utility shutoff protections," Journal of Public Economics, Elsevier, vol. 230(C).
    12. Pattison, Nathaniel & Millimet, Daniel L., 2023. "A Tale of Two Bankruptcies: Geographic Differences in Bankruptcy Chapter Choice," IZA Discussion Papers 16105, Institute of Labor Economics (IZA).
    13. Mohammed El Hazzouri & Rowan El‐Bialy & Ela Veresiu & Kelley J. Main, 2023. "Vulnerable consumer experiences of (dis)empowerment with consumer protection regulations," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(3), pages 1066-1088, July.
    14. Pender, John & Jo, Young & Miller, Cristina, 2015. "Economic Impacts of Supplemental Nutrition Assistance Program Payments in Nonmetro vs. Metro Counties," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205626, Agricultural and Applied Economics Association.
    15. Peter Harasztosi & Attila Lindner, 2019. "Who Pays for the Minimum Wage?," American Economic Review, American Economic Association, vol. 109(8), pages 2693-2727, August.
    16. José Azar & Emiliano Huet & Ioana Marinescu & Bledi Taska & Till von, 2024. "Minimum Wage Employment Effects and Labour Market Concentration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(4), pages 1843-1883.
    17. Cabras, Stefano & Fidrmuc, Jan & de Dios Tena Horrillo, Juan, 2017. "Minimum wage and employment: Escaping the parametric straitjacket," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-20.
    18. Zhu, Ling & Liu, Shasha & Kong, Dongmin, 2023. "Governments' fiscal stress and firm decentralization," International Review of Financial Analysis, Elsevier, vol. 90(C).
    19. Joan Monras, 2020. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Journal of Political Economy, University of Chicago Press, vol. 128(8), pages 3017-3089.
    20. Marianna Kudlyak & Murat Tasci & Didem Tuzemen, 2019. "Minimum Wage Increases and Vacancies," Working Papers 19-30R, Federal Reserve Bank of Cleveland, revised 21 Apr 2022.

    More about this item

    Keywords

    consumer protection policies; household finance; alternative financial services;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp17248. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.