The Effects of Disclosure and Enforcement on Payday Lending in Texas

Jialan Wang and Kathleen Burke

No 28765, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Inspired by the field experiment in Bertrand and Morse (2011), the state of Texas adopted an information disclosure for consumers taking out payday loans starting in January, 2012. The disclosure compares the cost of payday loans with other credit products, and presents their likelihood of renewal in easy-to-understand terms. Simultaneously, Austin and Dallas implemented stricter supply restrictions through city ordinances. We analyze both types of regulations, and find that the statewide disclosures led to a significant and persistent 13% decline in loan volume in the first six months after implementation. The city ordinances led to a 61% decline in loan volume in Austin and a 44% decline in Dallas, with the timing of the effect driven by the start of enforcement rather than the effective date of regulation. The results show that both behaviorally-motivated disclosures and city-level supply restrictions can have a significant impact on equilibrium loan quantities, with no effect on prices or evidence of evasive income falsification.

JEL-codes: D12 D14 G23 G28 G41 G51 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-exp
Note: CF LE PE
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Published as Jialan Wang & Kathleen Burke, 2021. "The effects of disclosure and enforcement on payday lending in Texas," Journal of Financial Economics, .

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