The Federal Reserve Bank of New York released a report
(PDF) that argues North Carolina and Georgia’s payday lending ban
doesn’t help consumers. An excerpt from the study’s conclusion:
“Georgians and North Carolinians do not seem better off since their
states outlawed payday credit: they have bounced more checks,
complained more about lenders and debt collectors, and have filed for
Chapter 7 (?no asset?) bankruptcy at a higher rate. The increase in
bounced checks represents a potentially huge transfer from depositors to banks and credit unions…
“While our findings contradict the debt trap/addiction hypothesis
against payday lending, they are consistent with alternative hypothesis
that payday credit is cheaper than the bounce ?protection? that earns
millions for credit unions and banks. Forcing households to
replace costly credit with even costlier credit is bound to make them
worse
off.”
Of course, this report did not receive a warm welcome from
payday lending opponents, such as the Center for Responsible Lending
(CRL). CRL immediately issued a response condemning the report.
A
response to CRL’s criticism was added to the original Fed report (which
is a working paper) and it methodically refutes CRL”s points.
For anyone interested in the payday lending issue, the report and the back and forth is useful.
