Advertisement

Introduction

  • Jerry Buckland
  • Brenda Spotton Visano
Chapter

Abstract

This chapter begins by discussing some of the reasons that payday lending has attracted so much attention in that it is a convenient and expensive source of small loans primarily for people with limited budgets and credit options. The chapter includes a summary of each of the contributions to this edited volume. This chapter summarizes the extensive literature related to payday loans and lending, with an emphasis on the literature from the United States and Canada. The industry has grown over the last 20 years but its growth more recently has slowed. Its origin is in Anglo-American nations, but there is evidence that it has expanded beyond these borders, for example, South Africa and Poland. The literature has investigated if customers benefit from these loans, why do they use payday loans, and particularly important, why do some borrow repeatedly. More recently, behavioral studies have added another angle to understanding borrowers’ behavior. Finally, this chapter summarizes what the literature says about payday regulations.

References

  1. Anderson, John. 2013. Making the Case for Postal Banking in Canada. Ottawa: Canadian Centre for Policy Alternatives.Google Scholar
  2. Baradaran, Mehrsa. 2015. How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  3. Barth, James R., Jitka Hilliard, and John S. Jahera, Jr. 2015. Banks and Payday Lenders: Friends Or Foes? International Advances in Economic Research 21 (2): 139–153.Google Scholar
  4. Bertrand, Marianne, and Adair Morse. 2011. Information Disclosure, Cognitive Biases, and Payday Borrowing. Journal of Finance 66 (6): 1865–1893.CrossRefGoogle Scholar
  5. Bertrand, Marianne, Sendhil Mullainathan, Dean Karlan, Eldar Shafir, and Jonathan Zinman. 2009. What’s Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment. Working Papers, Economic Growth Center, Yale University.Google Scholar
  6. Bhutta, Neil. 2013. Payday Loans and Consumer Financial Health. Finance and Economics Discussion Series, No. 2013-81, Board of Governors of the Federal Reserve System (U.S.).Google Scholar
  7. Brennan, Marilyn, Brian McGregor, and Jerry Buckland. 2011. The Changing Structure of Inner-City Retail Banking: Examining Bank Branch and Payday Loan Outlet Locations in Winnipeg, 1980–2009. Canadian Journal of Urban Research 20 (1): 1–32.Google Scholar
  8. Buckland, Jerry. 2012. Hard Choices: Financial Exclusion, Fringe Banks, and Poverty in Urban Canada. Toronto: University of Toronto Press.Google Scholar
  9. Buckland, Jerry, Tom Carter, Wayne Simpson, Anita Friesen, and John Osborne. 2007. Serving Or Exploiting People Facing a Short-Term Credit Crunch? A Study of Consumer Aspects of Payday Lending in Manitoba. Winnipeg, Canada.Google Scholar
  10. Caskey, John P. 1994. Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor. New York, NY: Russell Sage Foundation.Google Scholar
  11. ———. 2005. Fringe Banking and the Rise of Payday Lending. In Credit Markets for the Poor, ed. Patrick Bolton and Howard Rosenthal. New York: The Russell Sage Foundation.Google Scholar
  12. ———. 2010. Payday Lending: New Research and the Big Question. Working Papers, No. 10–32, Federal Reserve Bank of Philadelphia, Philadelphia.Google Scholar
  13. ———. 2012. Payday Lending: New Research and the Big Question. In Oxford Handbook of the Economics of Poverty, ed. Philip Jefferson. New York: Oxford University Press.Google Scholar
  14. Consumer Federation of America. 2011. CFA Survey of Online Payday Loan Websites. Washington, DC.Google Scholar
  15. Consumer Protection BC. 2016. BC Aggregated Payday Loan Data – Self-Reported for License Years ending on October 31. Victoria, BC. https://www.consumerprotectionbc.ca/wordpress/wp-content/uploads/2017/10/2016-Payday-Aggregate-Loan-Data-Table-for-Web.pdf
  16. Consumers’ Association of Canada (Manitoba) Inc. 2015. Privacy in Online Lending: An Analysis of Online Payday Lenders’ Privacy Policies and Consumer Expectations for Privacy Protection. Winnipeg, Canada.Google Scholar
  17. Deloitte. 2014. Strengthening Ontario’s Payday Loans Act: Payday Lending Panel Findings and Recommendations Report. Toronto.Google Scholar
  18. Denise Barrett Consulting. 2015. Consumer Experiences in Online Payday Loans. Toronto.Google Scholar
  19. DFC Global Corp. 2014. Form 10-K for the Year Ended June 30, 2013. Berwyn, US: DFC Global Corp. https://www.sec.gov/Archives/edgar/data/1271625/000119312513352311/d590562d10k.htm
  20. Dijkema, Brian, and Rhys McKendry. 2016. Banking on the Margins: Finding Ways to Build and Enabling Small-Dollar Credit Market. Hamilton: Cardus.Google Scholar
  21. Edmiston, Kelly D. 2011. Could Restrictions on Payday Lending Hurt Consumers? Federal Reserve Bank of Kansas City Economic Review 96 (1): 63–93.Google Scholar
  22. Fantauzzi, J. 2016. Predatory Lending: A Survey of High Interest Alternative Financial Service Users. Canadian Centre for Policy Alternatives and ACORN Canada.Google Scholar
  23. Fejos, Andrea. 2015. Achieving Safety and Affordability in the UK Payday Loans Market. Journal of Consumer Policy 38 (2): 181–202.CrossRefGoogle Scholar
  24. Financial Consumer Agency of Canada. 2016. Payday Loans: Market Trends. https://www.canada.ca/en/financial-consumer-agency/programs/research/payday-loans-market-trends.html
  25. Fitzpatrick, Katie, and Alisha Coleman-Jensen. 2014. Food on the Fringe: Food Insecurity and the Use of Payday Loans. Social Service Review 88 (4): 553–593.CrossRefGoogle Scholar
  26. Gathergood, John. 2012. Self-Control, Financial Literacy and Consumer Over-Indebtedness. Journal of Economic Psychology 33 (3): 590–602.CrossRefGoogle Scholar
  27. Grant, Tavia, and Janet McFarland. 2015. Payday Loans: Predatory Loan Sharks or Crucial Fix in a Pinch? The Globe and Mail. http://www.theglobeandmail.com/report-on-business/payday-loans-predatory-loan-sharks-or-crucial-fix-in-a-pinch/article24463029/. Accessed 27 July 2015.
  28. Kaufman, Alex. 2013. Payday Lending Regulation. Finance and Economics Discussion Series, No. 2013-62, Board of Governors of the Federal Reserve System (U.S.).Google Scholar
  29. Lawrence, Edward C., and Gregory Elliehausen. 2008. A Comparative Analysis of Payday Loan Customers. Contemporary Economic Policy 26 (2): 299–316.CrossRefGoogle Scholar
  30. Leyshon, Andrew, and Nigel J. Thrift. 1997. Money/Space: Geographies of Monetary Transformation. London: Routledge.Google Scholar
  31. Leyshon, Andrew, Paola Signoretta, David Knights, Catrina Alferoff, and Dawn Burton. 2006. Walking with Moneylenders: The Ecology of the UK Home-Collected Credit Industry. Urban Studies 43 (1): 161–186.CrossRefGoogle Scholar
  32. Lusardi, Annamaria, and Olivia S. Mitchell. 2014. The Economic Importance of Financial Literacy: Theory and Evidence. Journal of Economic Literature 52 (1): 5–44.CrossRefGoogle Scholar
  33. McKernan, Signe-Mary, Caroline Ratcliffe, and Daniel Kuehn. 2010. Prohibitions, Price Caps, and Disclosures: A Look at State Policies and Alternative Financial Product Use. Washington, DC: Urban Institute.Google Scholar
  34. Melzer, Brian T. 2014. Spillovers from Costly Credit. Working Papers, Center for Economic Studies, U.S. Census Bureau.Google Scholar
  35. Mills, Gregory B., and William Monson. 2013. The Rising Use of Nonbank Credit among U.S. Households: 2009–2011. Washington, DC: Urban Institute.Google Scholar
  36. Montezemolo, Susanna. 2013. Payday Lending Abuses and Predatory Practices. Durham, NC: Center for Responsible Lending.Google Scholar
  37. Mullainathan, Sendhil, and Eldar Shafir. 2013. Scarcity: Why Having Too Little Means so Much. New York: Henry Holt, Times Books.Google Scholar
  38. Packman, Carl. 2014. A Short History of Payday Lending. History Workshop Journal 81 (1) (Spring).Google Scholar
  39. Pew Charitable Trusts. 2012. Payday Lending in America: Who Borrows, Where They Borrow, and Why. Washington, DC: Pew Center on the States.Google Scholar
  40. ———. 2013a. How Borrowers Choose and Repay Payday Loans: Payday Lending in America. Washington, DC: Pew Center on the States.Google Scholar
  41. ———. 2013b. Payday Lending in America: Policy Solutions. Washington, DC: Pew Center on the States.Google Scholar
  42. ———. 2014. Fraud and Abuse Online: Harmful Practices in Internet Payday Lending. Philadelphia: Pew Charitable Trusts.Google Scholar
  43. Pollon, Christopher. 2015. Easy Money. The Walrus, June 19.Google Scholar
  44. Prager, Robin A. 2014. Determinants of the Locations of Alternative Financial Service Providers. Review of Industrial Organization 45 (1): 21–38.CrossRefGoogle Scholar
  45. Service Nova Scotia. 2015. Opening Statement of Service Nova Scotia (SNS): February 2015 Payday Loan Hearing. Halifax, Canada: Service Nova Scotia.Google Scholar
  46. Shefrin, Hersh M., and Richard H. Thaler. 1993. The Behavioral Life-Cycle Hypothesis. In Economics and Psychology, ed. Shlomo Maital and Sharone L. Maital, 166–200. Cheltenham, UK: Edward Elgar.Google Scholar
  47. Simpson, Wayne, and Dana Bazarkulova. 2013. Payday Loans Consumer Profile Based on the 2009 Canada Financial Capabilities Survey. Winnipeg.Google Scholar
  48. Simpson, Wayne, and Jerry Buckland. 2016. The Dynamics of Financial Institution Location in Toronto: Who Is Serving the Inner City? Economic Development Quarterly 30 (4): 1–29.CrossRefGoogle Scholar
  49. Soederberg, Susanne. 2014. Debtfare States and the Poverty Industry. London: Routledge.Google Scholar
  50. Squires, Gregory D., and Sally O’Connor. 2001. Color and Money: Politics and Prospects for Community Reinvestment in Urban America. Albany, NY: Suny Press.Google Scholar
  51. Thaler, Richard H., and Cass R. Sunstein. 2008. Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven, CT: Yale University Press.Google Scholar
  52. Wolff, Sarah D. 2015. The Cumulative Costs of Predatory Practices. Durham, NC: Center for Responsible Lending.Google Scholar
  53. Zinman, Jonathan. 2010. Restricting Consumer Credit Access: Household Survey Evidence on Effects around the Oregon Rate Cap. Journal of Banking and Finance 34 (3): 546–556.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Jerry Buckland
    • 1
  • Brenda Spotton Visano
    • 2
  1. 1.Menno Simons College, Canadian Mennonite UniversityAffiliated with the University of WinnipegWinnipegCanada
  2. 2.Department of Economics, School of Public Policy and AdministrationYork UniversityTorontoCanada

Personalised recommendations