Law Commons^™

Do Defaults On Payday Loans Matter?, Ronald J. Mann

Faculty Scholarship

This essay examines the effect on a borrower’s financial health of failure to repay a payday loan. Recent regulatory initiatives suggest an inclination to add an “ability to pay” requirement to payday-loan underwriting that would be fundamentally inconsistent with the nature of the product. Because the premise of that regulation would be that borrowers suffer harm when they fail to repay such a loan, it is timely to examine the after-effects of such a default empirically. This essay examines that question using a dataset that combines payday borrowing histories with credit bureau information.

The essay uses a difference-in-difference approach, comparing …