Is There Statistical Evidence that the Oregon Payday-Loan Rate Cap Hurts Consumers?

TL;DR

This paper critically examines the claim that Oregon's payday loan rate cap harmed consumers, finding no statistical evidence supporting the assertion and highlighting methodological flaws in prior industry-funded surveys.

Contribution

It provides a rigorous analysis showing that the alleged negative impacts of the Oregon payday loan cap are unsupported by credible data.

Findings

Oregon borrowers did not fare worse than Washington borrowers on key financial variables.

Survey evidence used to claim harm is methodologically flawed and industry-funded.

Oregon respondents performed better on on-time bill payments and avoiding phone disconnections.

Abstract

1. A recent unpublished manuscript whose conclusions were widely circulated in the electronic media (Zinman, 2009) claimed that Oregon 2007 payday loan (PL) rate-limiting regulations (hereafter, "Cap") have hurt borrowers. 2. The report's main conclusion, phrased in cause-and-effect language in the abstract - "...restricting access caused deterioration in the overall financial condition of the Oregon households..." - relies on a single, small-sample survey funded by the payday-lending industry (PLI). The survey is fraught with methodological flaws. 3. Moreover, survey results do not support the claim that Oregon borrowers fared worse than Washington borrowers, on any variable that can be plausibly attributed to the Cap. 4. In fact, Oregon respondents fared better than Washington respondents on two key variables: on-time bill payment rate and avoiding phone-line disconnects. On all other relevant variables they fared similarly to Washington respondents. In short, the reported claim is baseless.