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Exploitation of payday loan users: Fact or fiction?

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  • Silvia Szilagyiova

    (York Business School, York St John University)

Abstract

This paper explores the existence of different forms and underpinning reasons of exploitation at households level. The empirical analysis, based on data from the British Household Panel Survey (BHPS) collected for the purpose of understanding the social and economic change in Britain, aims to identify underpinning factors of mixed conclusions from empirical evidence on the existence of exploitation of payday loan users. This paper goes beyond traditional economic explanation and focuses on factors defining conditional relative advantage exploitation leading to voluntary exploitation. The results suggest that due to an ?act in desperation?, current regulations on payday loan lending are powerless and cannot prevent households being voluntary exploited. In addition, results show that increased household financial burden and additional borrowing increase the likelihood of households to take a gamble in order to provide basic needs. The results provide more insight into why current policy regulations fail to tackle the problem of payday loan lending.

Suggested Citation

  • Silvia Szilagyiova, 2019. "Exploitation of payday loan users: Fact or fiction?," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(2), pages 127-147, December.
    • Handle: RePEc:sek:jijoes:v:8:y:2019:i:2:p:127-147
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    More about this item

    Keywords

    Payday loan; voluntary exploitation; absolutely disadvantaged households;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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