Payday Loan Regulation and Neighborhood Crime

36 Pages Posted: 22 Jul 2014 Last revised: 5 Nov 2016

See all articles by Yilan Xu

Yilan Xu

University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics

Date Written: August 22, 2016

Abstract

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

Xu, Yilan, Payday Loan Regulation and Neighborhood Crime (August 22, 2016). Available at SSRN: https://ssrn.com/abstract=2470170 or http://dx.doi.org/10.2139/ssrn.2470170

Yilan Xu (Contact Author)

University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics ( email )

309 Mumford Hall
Urbana, IL 61801
United States

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