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Restricting consumer credit access: household survey evidence on effects around the Oregon rate cap

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Author Info
Jonathan Zinman
Abstract

Many policymakers and some behavioral models hold that restricting access to expensive credit helps consumers by preventing overborrowing. The author examines some short-run effects of restricting access, using household panel survey data on payday loan users collected around the imposition of binding restrictions on payday loan terms in Oregon. The results suggest that borrowing fell in Oregon relative to Washington, with former payday loan users shifting partially into plausibly inferior substitutes. Additional evidence suggests that restricting access caused deterioration in the overall financial condition of the Oregon households. The results suggest that restricting access to expensive credit harms consumers on average.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 08-32.

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Date of creation: 2008
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Handle: RePEc:fip:fedpwp:08-32

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Keywords: Consumer credit;

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  1. Robert DeYoung & Ronnie J. Phillips, 2007. "Strategic pricing of payday loans: evidence from Colorado, 2000-2005," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 260-279.
  2. Jonathan Morduch, 1998. "Does Microfinance Really Help the Poor? New Evidence from Flagship Programs in Bangladesh," Working Papers 198, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies.. [Downloadable!]
  3. Mark M. Pitt & Shahidur R. Khandker & Omar Haider Chowdhury & Daniel L. Millimet, 2003. "Credit Programs for the Poor And the Health Status of Children in Rural Bangladesh," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 87-118, February. [Downloadable!] (restricted)
  4. Mark Flannery & Katherine Samolyk, 2005. "Payday lending: do the costs justify the price?," Proceedings, Federal Reserve Bank of Chicago, issue Apr. [Downloadable!]
  5. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter. [Downloadable!] (restricted)
  6. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  7. David Laibson & Andrea Repetto & Jeremy Tobacman, 2007. "Estimating Discount Functions with Consumption Choices over the Lifecycle," NBER Working Papers 13314, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, vol. 95(3), pages 780-795, June. [Downloadable!]
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  9. Nidhiya Menon, 2004. "Consumption Smoothing in Micro Credit Programs," Development and Comp Systems 0403005, EconWPA. [Downloadable!]
  10. Karlan, Dean S. & Zinman, Jonathan, 2007. "Expanding Credit Access: Using Randomized Supply Decisions To Estimate the Impacts," CEPR Discussion Papers 6180, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Robin Burgess & Rohini Pande & Grace Wong, 2005. "Banking for the Poor: Evidence From India," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 268-278, 04/05. [Downloadable!] (restricted)
  12. Donald P. Morgan & Michael R. Strain, 2007. "Payday holiday: how households fare after payday credit bans," Staff Reports 309, Federal Reserve Bank of New York. [Downloadable!]
  13. Coleman, Brett E., 1999. "The impact of group lending in Northeast Thailand," Journal of Development Economics, Elsevier, vol. 60(1), pages 105-141, October. [Downloadable!] (restricted)
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