Straight on the heels of newly approved regulations that effectively ban payday lending services in Ohio, a study released today from Dartmouth College demonstrates that a 2007 cap on short-term payday loans in Oregon has substantially harmed borrowers there. The study shows why anti-payday activists are so misguided, and reinforces what we have been saying all along: Limiting credit access harms consumers.
Economist Jonathan Zinman found that when payday lenders left the state, Oregonians had to turn to alternatives that were all more costly than the short-term loans:
Zinman compares his statistics on households in Oregon to those in Washington (where short-term payday loan services remained intact) and found that “the Oregon households were far more likely to experience a change for the worse in the key financial outcomes.”
Especially in a time when more and more Americans are struggling to gain access to short-term credit, payday lenders have filled a void and helped consumers bridge temporary gaps in their finances. Zinman’s findings even showed that the majority of respondents took out payday loans for “bills, emergencies, food/groceries, and other debt service.” Only 6 percent used payday loans for “shopping or entertainment.”
It doesn’t take an economist to understand that, for many, paying $15 for a two-week $100 loan is better than pawning a family television or bouncing checks. Sadly, Nanny State lawmakers and bureaucrat-knows-best activists have already eliminated that choice for Oregonians and Ohioans, and are pushing to further eliminate this valuable financial option across the country.
