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Determinants of the locations of payday lenders, pawnshops and check-cashing outlets

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  • Robin A. Prager

Abstract

A large and growing number of low-to-moderate income U.S. households rely upon alternative financial service providers (AFSPs) for a variety of credit products and transaction services, including payday loans, pawn loans, automobile title loans, tax refund anticipation loans and check-cashing services. The rapid growth of this segment of the financial services industry over the past decade has been quite controversial. One aspect of the controversy involves the location decisions of AFSPs. This study examines the determinants of the locations of three types of AFSPs--payday lenders, pawnshops, and check-cashing outlets. Using county-level data for the entire country, I find that the number of AFSP outlets per capita is significantly related to demographic characteristics of the county population (e.g., racial/ethnic composition, age, and education level), measures of the population's credit worthiness, and the stringency of state laws and regulations governing AFSPs.

Suggested Citation

  • Robin A. Prager, 2009. "Determinants of the locations of payday lenders, pawnshops and check-cashing outlets," Finance and Economics Discussion Series 2009-33, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2009-33
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    References listed on IDEAS

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    1. Caskey, John P, 1991. "Pawnbroking in America: The Economics of a Forgotten Credit Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(1), pages 85-99, February.
    2. repec:rre:publsh:v:34:y:2004:i:2:p:191-205 is not listed on IDEAS
    3. H. Damar, 2009. "Why Do Payday Lenders Enter Local Markets? Evidence from Oregon," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(2), pages 173-191, March.
    4. Gregory Elliehausen, 2006. "Consumers' Use of High-Price Credit Products: Do They Know What They Are Doing?," NFI Working Papers 2006-WP-02, Indiana State University, Scott College of Business, Networks Financial Institute.
    5. Burkey, Mark L. & Simkins, Scott P., 2004. "Factors affecting the location of payday lending and traditional banking services in North Carolina," MPRA Paper 36043, University Library of Munich, Germany.
    6. Joshua Shackman & Glen Tenney, 2006. "The Effects of Government Regulations on the Supply of Pawn Loans: Evidence from 51 Jurisdictions in the U.S," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(1), pages 69-91, August.
    7. Joshua Shackman & Glen Tenney, 2006. "The Effects of Government Regulations on the Supply of Pawn Loans: Evidence from 51 Jurisdictions in the U.S," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(2), pages 229-229, October.
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    Cited by:

    1. McKernan, Signe-Mary & Ratcliffe, Caroline & Kuehn, Daniel, 2013. "Prohibitions, price caps, and disclosures: A look at state policies and alternative financial product use," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 207-223.
    2. Bhutta, Neil, 2014. "Payday loans and consumer financial health," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 230-242.
    3. Hyoung Jun Kim & Bo Kyeong Lee & So Young Sohn, 2020. "Comparing spatial patterns of sole proprietorship and corporate payday lenders in Seoul, Korea," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 64(1), pages 215-236, February.
    4. Stefanie R. Ramirez, 2019. "Payday-loan bans: evidence of indirect effects on supply," Empirical Economics, Springer, vol. 56(3), pages 1011-1037, March.
    5. Stefanie R. Ramirez, 2020. "Regulation And The Payday Lending Industry," Contemporary Economic Policy, Western Economic Association International, vol. 38(4), pages 675-693, October.

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    Keywords

    Check cashing services; Payday loans;

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