Reseña del libro "Payday Loans and Consumer Financial Health (en Inglés)"
For a two-week $300 payday advance loan, payday lenders typically charge in excess of$45, a cost so high that many believe the loan could not possibly be in the best interest of theborrower. Nevertheless, some estimates indicate that payday loan volume grew more than fivefoldto almost $50 billion from the late 1990s to the mid 2000s (Stegman 2007). With the recentrise of the payday lending industry, questions abound about the characteristics and circumstancesof payday loan borrowers, and the ultimate impact of such loans on their welfare. Interest inpayday lending has grown among economists in particular because of the possibility thattransactions in this market may reflect a market failure due to asymmetric information orborrowers' cognitive biases or limitations, or demonstrate divergence in behavior fromtraditional models (hyperbolic discounting, for example).In 2007, Congress and the Department of Defense moved to ban payday lending tomembers of the military based on the view that such lending traps service members in a cycle ofdebt and threatens military readiness.2 And in 2010, the Dodd-Frank Wall Street Reform andConsumer Protection Act established the Consumer Financial Protection Bureau (CFPB) to helpregulate the market for consumer financial products, including the payday loan market.Historically, regulation of payday lending to the general population has often come at the statelevel, but the CFPB has authority to write and enforce new federal regulations to the extent thatthey judge payday loans to be "unfair, deceptive or abusive," and they have recently suggestedthat new consumer protections in the payday loan market may be forthcoming (CFPB 2013).In this paper, I draw on nationally representative panel data comprised of individualcredit records, as well as Census data on the location of payday loan shops at the ZIP code level, to test whether payday loans affect consumers' financial health. I use credit scores and scorechanges, as well as other credit record variables, as measures of financial health. Credit scoresconveniently summarize one's credit history, and previous research suggests payday loan usagecould affect credit scores. Importantly, use of and performance on payday loans does notdirectly affect traditional credit scores (such as the FICO score). Rather, payday loans can affectscores indirectly to the extent that such loans either improve or undermine consumers' ability tomanage cash flow and meet their financial obligations in general
