Suchergebnisse

This study discusses regulatory options that federal and state legislatures might consider for the payday loan industry. These options include outright prohibition; restricting the implicit annual percentage interest rate; limiting the amount per loan; limiting the number of concurrent loans; setting lower and upper limits on contract length; and defining the waiting period between loans. While other studies examining the payday loan industry have relied on user survey data or data from a specific lender, this study utilizes data collected by the administrative agent for all payday loan activity in several states, including Florida, Illinois, and Oklahoma. A comparison of key empirical results derived from the differing regulatory environments in these states provides guidance to those who consider imposing further regulation. The current regulatory constraints have resulted in a relatively low default rate, a high rate of loan denial, and a troubling industry reliance on the frequent borrower. An analytical framework is suggested for understanding the motivations of the low and high frequency borrowers.

The rent-to-own (RTO) business has emerged as an important component of the retailing sector. By offering immediate access to household goods for a small periodic fee without a credit check or down payment, RTO has strong appeal to low income and financially distressed consumers. A common perception of RTO is that they are disguised, high-interest installment agreements as most consumers eventually acquire the contracted merchandise by making all scheduled payments. We examine the nature of these agreements by using a unique data set of more than 350 thousand transactions drawn from 100 RTO stores in 46 states. Our main result, derived from an analysis of disposition and duration, is that RTO agreements are more frequently used for short-term needs rather than as a method of acquisition. Legislative and legal efforts to classify RTO agreements as primarily installment contracts cannot be justified by their pattern of use in the marketplace.