Determinants of Short-term Lender Location and Interest Rates
This study tests the degree to which payday and title lenders differentiate their store location and interest rates based on the socioeconomic characteristics of the areas in which they operate. We use store-level lender data, geographically matched IRS income data, and Census Bureau demographic data to answer these questions. In the case of lender location, we find that payday and title lenders tend to locate in areas with lower median age, a larger population of not married households, more restaurants, and more pawn shops. We also find a nonlinear relationship between lender location and individual incomes in the surrounding area. Regarding lender interest rates, we find that competition among lenders reduces average interest rates and that riskiness of borrowers, as measured by defaults, increases average interest rates. We also find that payday and title lenders have higher interest rates in areas with lower educational attainment, smaller proportions of Black residents, and fewer married households. This evidence seems to contradict the argument that payday and title lenders prey on minorities.
|Date of creation:||Dec 2013|
|Date of revision:|
|Publication status:||Published in Journal of Financial Services Research, forthcoming|
|Contact details of provider:|| Postal: |
Phone: (801) 422-2859
Fax: (801) 422-0194
Web page: https://economics.byu.edu/Pages/MacroLab/Home.aspx
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Scott Carrell & Jonathan Zinman, 2008. "In harm’s way? Payday loan access and military personnel performance," Working Papers 08-18, Federal Reserve Bank of Philadelphia.
- Brian T. Melzer, 2011. "The Real Costs of Credit Access: Evidence from the Payday Lending Market," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 517-555.
- H. Damar, 2009. "Why Do Payday Lenders Enter Local Markets? Evidence from Oregon," Review of Industrial Organization, Springer, vol. 34(2), pages 173-191, March.
- Robert DeYoung & Ronnie J. Phillips, 2009. "Payday loan pricing," Research Working Paper RWP 09-07, Federal Reserve Bank of Kansas City.
- Donald P. Morgan & Michael R. Strain & Ihab Seblani, 2012. "How Payday Credit Access Affects Overdrafts and Other Outcomes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 519-531, 03.
- Morse, Adair, 2011. "Payday lenders: Heroes or villains?," Journal of Financial Economics, Elsevier, vol. 102(1), pages 28-44, October.
- Burkey, Mark L. & Simkins, Scott P., 2004.
"Factors Affecting the Location of Payday Lending and Traditional Banking Services in North Carolina,"
The Review of Regional Studies,
Southern Regional Science Association, vol. 34(2), pages 191-205.
- 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.
- Charles Calomiris & Thanavut Pornrojnangkool, 2009.
"Relationship Banking and the Pricing of Financial Services,"
Journal of Financial Services Research,
Springer, vol. 35(3), pages 189-224, June.
- Charles Calomiris & Thanavut Pornrojnangkool, 2006. "Relationship Banking and the Pricing of Financial Services," NBER Working Papers 12622, National Bureau of Economic Research, Inc.
- Michael A. Stegman, 2007. "Payday Lending," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 169-190, Winter.
When requesting a correction, please mention this item's handle: RePEc:byu:byumcl:201306. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kerk Phillips)
If references are entirely missing, you can add them using this form.