The Paradox of the Payday Borrower: A Case Study of the Role of Planned Behavior in Borrowers’ Motivations and Experiences

Irene Herremans (), Peggy Hedges, Fereshteh Mahmoudian, Anne Kleffner and Mahrukh Tahir
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Irene Herremans: Haskayne School of Business, University of Calgary, Calgary, AB T2N 1N4, Canada
Peggy Hedges: Haskayne School of Business, University of Calgary, Calgary, AB T2N 1N4, Canada
Fereshteh Mahmoudian: Beedie School of Business, Simon Fraser University, Burnaby, BC V5N 1S6, Canada
Anne Kleffner: Haskayne School of Business, University of Calgary, Calgary, AB T2N 1N4, Canada
Mahrukh Tahir: Haskayne School of Business, University of Calgary, Calgary, AB T2N 1N4, Canada

JRFM, 2023, vol. 16, issue 5, 1-24

Abstract: This research used the theory of planned behavior as a framework to investigate the role of attitudes, behavioral control, norms, and previous behavior in payday loan borrowers’ difficulty or lack of difficulty in repaying loans. The data were collected from 138 respondents with payday loan experience via a questionnaire in a city in a western province in Canada as part of a campaign to change payday loan regulations. The research findings show that different approaches are necessary to address the needs of distinct types of payday borrowers, based on their repayment abilities and whether the loan improved their quality of life in the long term. Furthermore, we found, similar to previous literature, a group of payday borrowers who lack financial confidence. This sub-group is referred to as the “unsure” sub-group in our research and provides opportunities to improve the payday learning context. To accommodate the unsure group, payday lenders and conventional financial institutions can collaborate to offer innovative financial instruments, improve financial literacy through education, and provide better access to information about borrowers’ financial status. The confirmation of this unsure group also leads us to recommend further study to determine opportunities for payday borrowers to become better informed about their options, to increase financial confidence.

Keywords: payday loans; borrowers’ profiles; theory of planned behavior; financial confidence; financial literary; financial fragility (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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