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Payday lending, crime, and bankruptcy: Is there a connection?

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  • James R. Barth
  • Jitka Hilliard
  • John S. Jahera
  • Kang B. Lee
  • Yanfei Sun

Abstract

The payday lending industry has been the subject of controversy over the years. This is largely due to the high fee structure of payday loans and the view of some that the industry targets economically vulnerable groups. For these reasons, some states prohibit payday lending, while others impose regulatory restrictions on their operations. Despite the prohibitions and restrictions, the industry nonetheless serves a significant segment of the U.S. population. Our purpose is to determine whether in addition to providing loans to individuals, access to payday lenders is associated with less property crime and fewer bankruptcies. Using a unique data set obtained directly from all state regulatory authorities, we find evidence, contrary to some earlier studies, that the presence of payday lenders may help reduce property crime as well as personal bankruptcies.

Suggested Citation

  • James R. Barth & Jitka Hilliard & John S. Jahera & Kang B. Lee & Yanfei Sun, 2020. "Payday lending, crime, and bankruptcy: Is there a connection?," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(4), pages 1159-1177, December.
    • Handle: RePEc:bla:jconsa:v:54:y:2020:i:4:p:1159-1177
    DOI: 10.1111/joca.12318
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    References listed on IDEAS

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    Cited by:

    1. J. Brandon Bolen & Gregory Elliehausen & Thomas W. Miller, 2023. "Credit for me but not for thee: the effects of the Illinois rate cap," Public Choice, Springer, vol. 197(3), pages 397-420, December.

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