Banks and Payday Lenders: Friends or Foes?
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This paper investigates the geographic distribution of payday lenders and banks that operate throughout the United States. State-level data are used to indicate differences in the regulatory environment across the states. Given the different constrains on interest rates and other aspects of the payday loan products, we empirically examine the relationship between the number of payday lender stores and various demographic and economic characteristics. Our results indicate that number of stores is positively related to the percentage of African American population, the percentage of population that is aged 15 and under and the poverty rate. The number of stores is also negatively related to income per capita and educational levels.
KeywordsPayday lending Small loans Credit issues
JELD18 G21 G23
The authors are extremely grateful to Richard Cebula for inviting us to write and present this paper as well as helpful comments. Thanks are also due to Kang Lee for assistance with the ridge estimation application.
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