Swindled or Served?: A Survey of Payday Lending Customers in Southeast Alabama

Southern Business and Economics Journal, Forthcoming

19 Pages Posted: 30 Nov 2016 Last revised: 22 Jul 2017

See all articles by Christy Bronson

Christy Bronson

Troy University

Daniel J. Smith

Middle Tennessee State University - Department of Economics and Finance

Date Written: November 28, 2016

Abstract

Payday lenders have increasingly received public and regulatory scrutiny. By their nature, payday lenders are in the business of providing short-term, unsecured loans to financially vulnerable individuals, often with high financing fees that amount to triple-digit annual percentage rates (APR). Regulators hope to protect payday lending customers from high APRs, misleading or inaccurate information, and, in particular, from being trapped by a vicious cycle of growing debt. Whether these regulations benefit consumers, however, is contested. There is a growing literature in economics arguing that high APRs represent the costs of lending to a financially risky population, not exorbitant profits, and that many proposed regulations, especially interest rate limits, may actually harm the very payday lending customers regulators are hoping to protect. This study uses a survey of payday lending customers in Southeast Alabama to inform this debate. An Alabama-specific survey will also help inform payday lending policy in Alabama and can supplement national surveys. We find that payday lending customers in Southeast Alabama overwhelmingly use payday lending to meet unexpected, short-term expenses, are satisfied with their payday lending experience, including the information provided, and do not support further payday lending regulation.

Keywords: Payday Lending, Alabama, Survey

JEL Classification: G2, R51

Suggested Citation

Bronson, Christy and Smith, Daniel J., Swindled or Served?: A Survey of Payday Lending Customers in Southeast Alabama (November 28, 2016). Southern Business and Economics Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2876688 or http://dx.doi.org/10.2139/ssrn.2876688

Christy Bronson

Troy University ( email )

Troy, AL
United States

Daniel J. Smith (Contact Author)

Middle Tennessee State University - Department of Economics and Finance ( email )

MTSU Box 27
1301 E. Main St.
Murfreesboro, TN 37132-0001
United States

HOME PAGE: http://www.danieljosephsmith.com/

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