A newly released Federal Reserve Bank of Boston working paper, co-authored by Assistant Professor Roman Galperin of the Johns Hopkins Carey Business School, finds that low-income people benefit when their access to “payday lending” (short-term, high-rate loans) is restricted.
In the paper, Galperin and doctoral candidate Andrew Weaver of the Massachusetts Institute of Technology’s Sloan School of Management show that borrower demand for an alternative source of high-cost credit (such as loans against expected tax refunds) falls after payday lending is banned. These findings imply that many low-income borrowers are trapped in an unproductive cycle of debt and thus could benefit from regulatory bans on such forms of lending, according to the researchers.
Go to http://goo.gl/yZLuZy to read the paper, which is titled “Payday Lending Regulation and the Demand for Alternative Financial Services.”
To discuss the paper’s findings with Galperin, contact Patrick Ercolano in the Carey Business School communications office at [email protected] or 410-234-9296.