The effects of disclosure and enforcement on payday lending in Texas

Jialan Wang and Kathleen Burke

Journal of Financial Economics, 2022, vol. 145, issue 2, 489-507

Abstract: In 2012, Texas and two municipalities therein adopted regulations governing the payday loan market. Austin and Dallas enacted supply restrictions limiting the loan-to-income ratio and mandating amortization. The state adopted an information disclosure inspired by Bertrand and Morse (2011) presenting the cost and typical usage of payday loans in easy-to-understand terms. We find that the municipal restrictions led to a 61% decline in loan volume in Austin and a 44% decline in Dallas, with the effects driven by the start of enforcement. The statewide disclosures led to a persistent 12% decline in loan volume in the first six months.

Keywords: Payday lending; Disclosure; Financial regulation; Enforcement (search for similar items in EconPapers)
JEL-codes: D12 D14 G23 G28 G41 G51 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:2:p:489-507

DOI: 10.1016/j.jfineco.2021.09.024

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