Payday loans

This afternoon, let’s just do "Control-C" from Craig Newmark:

Paige Skiba (Vanderbilt Law School) and Jeremy Tobacman (Oxford), "The Profitability of Payday Loans":

Payday loans provide households
with expensive, short-term liquidity. This paper studies the
profitability of payday lending using standard financial data from CRSP
and SEC filings and loan-level data from a payday lender. Despite
charging e¤ective annualized rates of many percent, we find lenders’
firm-level returns differ little from typical financial returns. The
data are consistent with an interpretation that payday lenders face
high per-loan and per-store fixed costs in a competitive market.

I’d bet a similar analysis applies to the rent-to-own industry.


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