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

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  • 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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Bibliographic Info

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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References

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Citations

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Cited by:
  1. Marianne Bertrand & Adair Morse, 2011. "Information Disclosure, Cognitive Biases, and Payday Borrowing," Journal of Finance, American Finance Association, vol. 66(6), pages 1865-1893, December.
  2. Campbell, John Y. & Jackson, Howell E. & Madrian, Brigitte C. & Tufano, Peter, 2010. "The Regulation of Consumer Financial Products: An Introductory Essay with Four Case Studies," Working Paper Series rwp10-040, Harvard University, John F. Kennedy School of Government.
  3. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2012. "Can an interest-free credit facility be more efficient than a usurious payday loan?," Working Papers 12008, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  4. Sera Linardi & Tomomi Tanaka, 2012. "Competition as a Savings Incentive: a Field Experiment at a Homeless Shelter," Working Papers 484, University of Pittsburgh, Department of Economics.
  5. Carlos Madeira, 2012. "Tasas de Crédito Ajustadas por Riesgo e Implicancias para Políticas de Tasa Máxima Convencional," Working Papers Central Bank of Chile 654, Central Bank of Chile.
  6. Grant, Charles, 2010. "Evidence on the insurance effect of bankruptcy exemptions," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2247-2254, September.
  7. 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.
  8. Wilson Bart J & Findlay David W. & Meehan James W. & Wellford Charissa & Schurter Karl, 2010. "An Experimental Analysis of the Demand for Payday Loans," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-31, October.
  9. Robert DeYoung & Ronnie J. Phillips, 2013. "Interest rate caps and implicit collusion: the case of payday lending," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1/2), pages 121-158.
  10. Karlan, Dean S. & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila," CEPR Discussion Papers 7396, C.E.P.R. Discussion Papers.

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