Payday Loan Choices and Consequences

BHUTTA, NEIL; SKIBA, PAIGE MARTA; TOBACMAN, JEREMY

doi:10.1111/jmcb.12175

Cited by 154 publications

(92 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…These loans typically have high interest rates and they must be paid back in a relatively short period of time, when compared to long-term loans, such as student loans or mortgages [1, 6]. Payday loans are also accessible for those population groups who do not have stable income or assets to obtain loans with lower interest rates [1, 7]. …”

Section: Introductionmentioning

confidence: 99%

Problem gambling and psychological distress: a cross-national perspective on the mediating effect of consumer debt and debt problems among emerging adults

et al. 2018

View full text Add to dashboard Cite

BackgroundSevere economic difficulties are common among younger generations who currently have an easy access to consumer credit and payday loans in many Western countries. These accessible yet expensive short-term loans may lead to more severe financial difficulties, including default and debt enforcement, both which are defined as debt problems within this study. This study hypothesized that consumer debt and debt problems mediate the relationship between problematic gambling and psychological distress. Excessive gambling can be funded with consumer debt, which in turn leads to the accumulation of financial stressors and, eventually, psychological distress.MethodsThree studies were conducted to examine the hypotheses. Study 1 used a demographically balanced sample of Finnish participants aged 18 to 25 years (n = 985, 50.76% female). Study 2 used a sample collected from Finnish discussion forums and social networking sites, with participants ranging from 18 to 29 years of age (n = 205, 54.63% female). Study 3 used a demographically balanced sample of American youths aged 18 to 25 years (n = 883, 50.17% female). Analyses were based on generalized structural equation models examining the role of problem gambling, consumer debt, and debt problems (i.e., default and debt enforcement) on psychological distress. Additional mediation analysis was run with treating both instant loans and debt problems as mediators.ResultsAll three studies showed that problem gambling was associated with consumer debt, which was further associated with debt problems. Both consumer debt (studies 1 and 2) and debt problems (study 3) were associated with psychological distress. Problem gambling was also directly associated with psychological distress in studies 1 and 3, but not in study 2. In Finland, consumer debt mediated the relationship between problem gambling and psychological distress (studies 1 and 2), while study 3 underlined the mediating role of debt problems in the USA, where consumer debt itself was not positively associated with psychological distress.ConclusionsThe results of the three studies indicate that problem gambling-related psychological distress is partly explained by consumer debt. Consumer credit and payday loans may provide resources for gamblers that enable them to keep up with the habit. This may eventually lead to debt problems and psychological distress. Cross-national differences exist, but in both Nordic and American models, similar mechanisms prevail. The results imply that limiting consumer debt among emerging adults could cushion the financial and psychological costs of problem gambling.

show abstract

Section: Introductionmentioning

confidence: 99%

Problem gambling and psychological distress: a cross-national perspective on the mediating effect of consumer debt and debt problems among emerging adults

et al. 2018

View full text Add to dashboard Cite

show abstract

“…Variations in the local financial services environment matter because of the relationships between neighborhoods' brick-and-mortar financial services and their residents' participation in economic life, such as paying bills (Friedline, Despard, and West 2017a), receiving health care (Eisenberg-Guyot et al 2018;Melzer 2011), and accessing credit (Bertrand and Morse 2011;Bhutta 2014;Bhutta, Skiba, and Tobacman 2015;Friedline et al 2017b). For instance, having banks within closer proximity to or more highly concentrated in neighborhoods is associated with being more likely to use these financial services, have access to credit, and experience increased opportunities for entrepreneurship (Brown, Cookson, and Heimer 2016;Friedline et al 2017b;Kerr and Nanda 2009).…”

Section: The Local Financial Services Environmentmentioning

confidence: 99%

The Financial Services Environment and Schools' Savings Rates in the San Francisco Kindergarten to College Program

Friedline¹,

Dunham²,

O’Brien³

2019

Journal of Consumer Affairs

View full text Add to dashboard Cite

Children's savings accounts (CSAs) have emerged as a promising intervention to improve educational outcomes, curtail rising student loan debt, and promote equality of opportunity. Numerous localized CSA programs have emerged in the last decade, and many are embedded within school systems. This study leverages novel data to investigate participation in one of the oldest and most well‐known CSA programs in the country: the San Francisco Kindergarten to College (K2C) Program in the San Francisco Unified School District. Spatial analysis of 21,617 accounts at 74 elementary schools reveals statistically significant differences in the rates of elementary schools' K2C account participation based on the concentrations of banks, credit unions, and alternative financial service providers—net controls for neighborhood demographics. Unless explicitly addressed, substantial variations in the financial service environment across neighborhoods could undermine participation in school‐based CSA programs for the very children these programs intend to support.

show abstract

“…My result that payday lending improves household well‐being in periods of distress points to potential benefits of continued access to emergency credit for otherwise credit‐constrained households, as payday borrowers tend to be. Bhutta, Skiba, and Tobacman (), for example, find that “consumers apply for payday loans when they have limited access to mainstream credit.” They find that about 40% of payday loan applicants do not have a general purpose credit card and in total, almost 80% of payday loans applicants do not have any credit available on credit cards. My work suggests that severely restricting access to the payday loan market may have negative repercussions for households in distress, therefore.…”

Section: Payday Loan Laws By State During Sample Periodmentioning

confidence: 99%

High‐Cost Credit and Consumption Smoothing

Dobridge¹

2018

J of Money Credit Banking

View full text Add to dashboard Cite

In this paper, I show that high‐cost credit helps households smooth consumption following periods of temporary financial distress. After experiencing distress—that is, extreme weather events—I find that access to high‐cost payday lending mitigates declines in overall spending and nondurable goods spending generally. The results are particularly concentrated among households with a higher propensity to use payday credit or that have limited alternatives: lower income households, households with less than a college degree, and households with low levels of saving. These results highlight the consumption‐smoothing role that high‐cost credit plays for households with limited access to other types of credit.

show abstract

Payday Loan Choices and Consequences

Cited by 154 publications

References 33 publications

Problem gambling and psychological distress: a cross-national perspective on the mediating effect of consumer debt and debt problems among emerging adults

Problem gambling and psychological distress: a cross-national perspective on the mediating effect of consumer debt and debt problems among emerging adults

The Financial Services Environment and Schools' Savings Rates in the San Francisco Kindergarten to College Program

High‐Cost Credit and Consumption Smoothing

Contact Info

Product

Resources

About