Payday Lending: New Research and the Big Question

41 Pages Posted: 23 Oct 2010

See all articles by John Caskey

John Caskey

Swarthmore College - Economics Department; Bard College - The Levy Economics Institute

Date Written: October 1, 2010


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?

Suggested Citation

Caskey, John, Payday Lending: New Research and the Big Question (October 1, 2010). FRB of Philadelphia Working Paper No. 10-32, Available at SSRN: or

John Caskey (Contact Author)

Swarthmore College - Economics Department ( email )

Swarthmore, PA 19081
United States

Bard College - The Levy Economics Institute

Annandale-on-Hudson, NY 12504
United States

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