Payday-loan bans: evidence of indirect effects on supply
In November 2008, Ohio enacted the Short-Term Loan Law which imposed a 28% APR on payday loans, effectively banning the industry. Using licensing records from 2006 to 2010, I examine if there are changes in the supply side of the pawnbroker, precious-metals, small-loan, and second-mortgage lending industries during periods when the ban is effective. Seemingly unrelated regression results show the ban increases the average county-level operating small-loan, second-mortgage, and pawnbroker licensees per million by 156, 43, and 97%, respectively.
KeywordsFinancial institutions Alternative financial services Payday lending Regulation
Thanks to the referees for their comments and recommendations. The author would like to thank Mo Xiao, Gautam Gowrisankaran Ronald Oaxaca, and Price Fishback for guidance, support, and valuable comments and suggestions. Thanks also to Miguel Ramirez, Eric Stuen, Daniel Hickman, and D’Wayne Hodgin for additional valuable comments and suggestions. Research results and conclusions expressed are those of the author.
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