Social Cost of Payday Lending, Part II

Payday loans cost the U.S. economy nearly $1 billion and thousands of jobs in 2011, according to a report from the Insight Center for Community Economic Development

From an CNBC article in May. (

Yay! I am so pleased to see reports of a study like this, to know that more work has been done.

The social cost of payday lending

Finally! I have found a paper that begins to address the social cost of payday lending!  The costs of payday lending on the individual consumer have been widely researched, but I’ve wondered about the social costs of payday lending. By that I mean the costs incurred by a neighborhood or society because a payday lender is operating there.

Heretofore, I had always thought of court cases that a state spends resources on trying This paper looked at crime rates, but also suggested comparing property value differences, among other things.  I haven’t finished reading the paper yet, but I’m so excited about it that I wanted to share it.

When taxes aren’t a windfall

As a child, I remember driving past billboards advertising to get your taxes done somewhere and “Get the cash you deserve now!”  I remember trying to make sense of it the rest of the way home. “How do those places get refunds faster than just doing it yourself? Are they directly connected with the government or something? Do they have forms with special powers? How are they faster?”


Robbery at ball-point

Banks and other traditional financial institutions are regulated in such a way so as not to charge usurious fees and strap customers with predatory loan terms. Banks are in business to make money, and sometimes this happens at the expense of the consumer (which then eventually threatens the whole system). So there are regulations in place.


Payday lenders, on the other hand, aren’t so mainstream. They’re fringe banks and so they aren’t regulated in the same way. By the same logic, a bank isn’t a payday lender, and they don’t have anything to do with payday loans.


Banks do something extra, however.