Law Commons^™

Time To Repay Or Time To Delay? The Effect Of Having More Time Before A Payday Loan Is Due, Paige Marta Skiba, Susan Payne Carter, Kuan Liu, Justin Sydnor

Vanderbilt Law School Faculty Publications

We examine the effect of state laws on minimum payday loan durations that give some borrowers an additional pay cycle to repay their initial loan with no other changes to contract terms. Neoclassical models predict this “grace period” would reduce borrowers’ need for costly loan rollovers. However, in reality, borrowers’ repayment behavior with grace periods is very similar to borrowers with shorter loans, merely pushed out a few weeks. Potential explanations include heuristic repayment decisions and naïve present focus. A calibrated model suggests that present-focused borrowers get less than one-half of the benefit from a grace period that time-consistent borrowers …

Dude, Where's My Car Title?: The Law, Behavior, And Economics Of Title Lending Markets, Paige Marta Skiba, Kathryn Fritzdixon, Jim Hawkins

Vanderbilt Law School Faculty Publications

Millions of credit-constrained borrowers turn to title loans to meet their liquidity needs. Legislatures and regulators have debated how to best regulate these transactions, but surprisingly, we still know very little about the customers who use title loans. This Article reports findings from the first large-scale academic study of title lending customers. We surveyed over 400 title lending customers across three states and obtained information about customers’ demographic and behavioral characteristics.

Based on the results of our survey and guided by insights from behavioral economics, this Article seeks to reframe the title lending debate. Instead of focusing on the risks …

Regulation Of Payday Loans: Misguided?, Paige Marta Skiba

Vanderbilt Law School Faculty Publications

Since payday lenders came on the scene in 1990s, regulation of their "predatory" practices has been swift and often severe. Fourteen states now ban payday loans outright. From an economist's perspective, high-interest, short-term, small loans need not be a bad thing. Payday credit can help borrowers "smooth" consumption, unequivocally improving welfare as consumers borrow from future good times to help cover current shortfalls. These benefits of credit can accrue even at typical payday loan interest rates of 300%-600% APR. The question of whether payday credit actually assists borrowers in this way is an empirical one. In this Article, I review …