Swindled or Served? : A Survey of Payday Lending Customers in Southeast Alabama

Payday lenders have increasingly received public and regulatory scrutiny. By their nature, payday lenders are in the business of providing short-term, unsecured loans to financially vulnerable individuals, often with high financing fees that amount to triple-digit annual percentage rates (APR). Regulators hope to protect payday lending customers from high APRs, misleading or inaccurate information, and, in particular, from being trapped by a vicious cycle of growing debt. Whether these regulations benefit consumers, however, is contested. There is a growing literature in economics arguing that high APRs represent the costs of lending to a financially risky population, not exorbitant profits, and that many proposed regulations, especially interest rate limits, may actually harm the very payday lending customers regulators are hoping to protect. This study uses a survey of payday lending customers in Southeast Alabama to inform this debate. An Alabama-specific survey will also help inform payday lending policy in Alabama and can supplement national surveys. We find that payday lending customers in Southeast Alabama overwhelmingly use payday lending to meet unexpected, short-term expenses, are satisfied with their payday lending experience, including the information provided, and do not support further payday lending regulation