Public Cash Assistance and Spatial Predation: How State Cash-Transfer Environments Shape Payday Lender Geography

Abstract

In the past 3 decades, there has been a general contraction of social support while the high-cost lending industry has expanded. We examine how state-level variation in the generosity of Temporary Assistance for Needy Families (TANF) cash assistance affects the distribution of high-cost payday lenders across local communities between 2001 and 2017. When TANF support is relatively more generous, the density of payday lending storefronts increases in local communities, all else equal, suggesting that benefits are not enough to replace payday lending demand. Yet local communities also experience slower lender growth as TANF generosity increases, suggesting that the payday lending industry is less growth oriented under these conditions. Further analyses considering the Supplemental Nutrition Assistance Program and unemployment insurance confirm that the payday lending industry is sensitive to social program conditions. Findings suggest that the generosity of cash assistance can be leveraged to reduce the high-cost lending industry’s prevalence.