Restrictions on Credit: A Public Policy Analysis of Payday Lending

47 Pages Posted: 29 Oct 2008 Last revised: 20 Jul 2012

Petru S Stoianovici

Charles River Associates (CRA)

Michael T. Maloney

Clemson University - John E. Walker Department of Economics

Date Written: October 28, 2008

Abstract

Using state level data between 1990 and 2006, we find no empirical evidence that payday lending leads to more bankruptcy filings, which casts doubt on the debt trap argument against payday lending. We capture the intensity of the payday lending activity in a state by the number of payday lending stores. We control for restrictions on payday lenders by including into the analysis six variables that we construct that rank legislative provisions across states and across time. We use two different estimation procedures: difference-in-difference and Granger causality.

Keywords: payday lending, payday loan, short term unsecured loan, cash advance, deferred deposit loan, personal bankruptcy, bankruptcy, subprime credit market, consumer finance, household finance

JEL Classification: D12, D18, D69, G28, G29, K23

Suggested Citation

Stoianovici, Petru S and Maloney, Michael T., Restrictions on Credit: A Public Policy Analysis of Payday Lending (October 28, 2008). Available at SSRN: https://ssrn.com/abstract=1291278 or http://dx.doi.org/10.2139/ssrn.1291278

Petru S Stoianovici (Contact Author)

Charles River Associates (CRA)

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

Michael T. Maloney

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States
864-656-3430 (Phone)
864-656-4192 (Fax)

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