Payday Loan Regulation and Neighborhood Crime
36 Pages Posted: 22 Jul 2014 Last revised: 5 Nov 2016
Date Written: August 22, 2016
This study examines how a payday loan regulation has affected crime in neighborhoods where payday loans used to be prevalent. The empirical evidence suggests that financially motivated crime declined both in the short and intermediate terms in Chicago after the state regulated the cost of loans, limited repeated borrowing, and prohibited aggressive debt collection. No measurable declines in non-financial crime are detected, neither are changes in foreclosures or other business activities. Several potential mechanisms suggested by the criminology literature are discussed. It was most likely that the lending restrictions alleviated financial damages that could motivate crime in extreme cases.
Keywords: Payday loans, crimes, neighborhood stability
JEL Classification: D12; D18; G21; G28; R12
Suggested Citation: Suggested Citation