Can payday loan bans and financial literacy benefit consumers?

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2025-03-29 DOI:10.1016/j.frl.2025.107326

Eric McKee, Oscar Solis, Wei Zhang

引用次数: 0

Abstract

By exploiting variation in the payday loan availability induced by state-level regulation changes, we investigate the impact of payday loan bans on consumers’ credit outcomes and financial welfare. We find that consumers in states with new bans significantly reduced the usage of payday loans and alternative financial services (AFS) and experienced a lower likelihood of difficulty in paying bills and mortgages relative to those in other states. Furthermore, both the credit and welfare effects are stronger for consumers with lower levels of financial literacy. These individuals experienced greater reductions in payday loan and AFS usage, as well as economic hardship. In contrast, high-literacy consumers used payday loans less in the first place and derived fewer benefits from the bans. Our results highlight the important role of financial literacy in mitigating the adverse effects of payday loans.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance