Advertisement

Review of Industrial Organization

, Volume 45, Issue 1, pp 21–38 | Cite as

Determinants of the Locations of Alternative Financial Service Providers

  • Robin A. PragerEmail author
Article

Abstract

Many low-to-moderate income US households rely upon alternative financial service providers (AFSPs) for a variety of credit products and transaction services. The social welfare implications of this segment of the financial services industry are quite controversial. One aspect of the controversy involves the location decisions of AFSPs. This study examines the determinants of the locations of three types of AFSPs: payday lenders, pawnshops, and check-cashing outlets. Using county-level data for the entire country, I find that the number of AFSP outlets per capita is significantly related to demographic characteristics of the county population, measures of the population’s creditworthiness, and the stringency of state laws and regulations that govern AFSPs.

Keywords

Alternative financial services Check cashers Pawnshops  Payday lending 

Notes

Acknowledgments

I am grateful to Matt Fellowes and Mia Mabanta for providing data on the number of payday loan stores, pawnshops, check-cashing outlets, and credit union branches in each US county; the editor and two anonymous referees for valuable comments and suggestions; and Stefanie Ramirez and Sharada Sridhar for outstanding research assistance

References

  1. Advance America, Cash Advance Centers, Inc. (2007). Form 10-K for fiscal year ending December 31, 2007. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml.
  2. Apgar, W. C., Jr. & Herbert, C. E. (2006). Subprime lending and alternative financial service providers: A literature review and empirical analysis. Prepared for U.S. Department of Housing and Urban Development, Office of Policy Development and Research by Abt Associates Inc, Cambridge, MA.Google Scholar
  3. Burkey, M. L., & Simkins, S. P. (2004). Factors affecting the location of payday lending and traditional banking services in North Carolina. Review of Regional Studies, 34(2), 191–205.Google Scholar
  4. Cash America International, Inc. (2007). Form 10-K for the fiscal year ended December 31, 2007. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml
  5. Caskey, J. P. (1991). Pawnbroking in America: The economics of a forgotten credit market. Journal of Money, Credit and Banking, 23(1), 85–99.CrossRefGoogle Scholar
  6. Caskey, J. P. (1994). Fringe banking: Check-cashing outlets, pawnshops, and the poor. New York: Russell Sage Foundation.Google Scholar
  7. Caskey, J. P. (2005). Fringe banking and the rise of payday lending. In P. Bolton & H. Rosenthal (Eds.), Credit markets for the poor (pp. 17–45). New York: Russell Sage Foundation.Google Scholar
  8. Consumer Financial Protection Bureau. (2013). Payday loans and deposit advance products: A white paper of initial data findings.Google Scholar
  9. Damar, H. E. (2009). Why do payday lenders enter local markets? Evidence from Oregon. Review of Industrial Organization, 34(2), 173–191.CrossRefGoogle Scholar
  10. Elliehausen, G. (2006). Consumers’ use of high-price credit products: Do they know what they are doing? Networks Financial Institute at Indiana State University working paper 2006-WP-02.Google Scholar
  11. EZCORP, Inc. (2007). Form 10-K for the fiscal year ended September 30, 2007. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml.
  12. Fellowes, M. & Mabanta, M. (2008). Banking on wealth: America’s new retail banking infrastructure and its potential for building wealth. Brookings Institution Research Brief.Google Scholar
  13. Graves, S. M. (2003). Landscapes of predation, landscapes of neglect: A location analysis of payday lenders and banks. The Professional Geographer, 55(3), 303–317.Google Scholar
  14. Hynes, R. M. (2012). Payday lending, bankruptcy, and insolvency. Washington and Lee Law Review, 69(2), 607–648.Google Scholar
  15. Mann, R. (2013). Assessing the optimism of payday loan borrowers. Columbia Law School working paper No. 443.Google Scholar
  16. Melzer, B. T. (2011). The real costs of credit access: Evidence from the payday lending market. The Quarterly Journal of Economics, 126(1), 517–555.CrossRefGoogle Scholar
  17. Morse, A. (2011). Payday lenders: Heroes or villains? Journal of Financial Economics, 102(1), 28–44.CrossRefGoogle Scholar
  18. Pew Charitable Trusts. (2013a). How borrowers choose and repay payday loans.Google Scholar
  19. Pew Charitable Trusts. (2013b). Payday lending in America policy solutions.Google Scholar
  20. QC Holdings, Inc. (2006). Form 10-K for fiscal year ended December 31 2006. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml.
  21. Rotella, E. J. (2003). Pawnbroking and personal loan markets. In J. Mokyr (Ed.), The Oxford encyclopedia of economic history (pp. 170–173). Oxford: Oxford University Press.Google Scholar
  22. Shackman, J. D., & Tenney, G. (2006). The effects of government regulations on the supply of pawn loans: Evidence from 51 Jurisdictions in the US. Journal of Financial Services Research, 30(1), 69–91.CrossRefGoogle Scholar
  23. Stephens, Inc. (2007). Payday loan industry annual industry update.Google Scholar
  24. Temkin, K., & Sawyer, N. (2004). Analysis of alternative financial service providers. Prepared for the Fannie Mae Foundation by the Urban Institute Metropolitan Housing and Communities Policy Center.Google Scholar

Copyright information

© Springer Science+Business Media New York (outside the USA)  2014

Authors and Affiliations

  1. 1.Board of Governors of the Federal Reserve SystemWashingtonUSA

Personalised recommendations