Publication DateNovember 2007
Author(s)Janneke Ratcliffe, Kim R. Manturuk
The absence of storefront payday lending has not made a significant impact on credit availability in North Carolina. For those impacted, over twice as many report that the absence of payday lending has had a positive effect on their household rather than a negative one.
This study was undertaken at the request of the North Carolina Office of the Commissioner of Banks to assess the situation facing households in the credit market since the end of legal payday lending in North Carolina. What effect has de-authorization of payday lending had on low- and middle-income working households? Do adequate alternatives exist? What alternatives are most commonly used, and how do they compare to payday loans? Ultimately, are North Carolina residents better off without payday lending?
To address these questions, we surveyed 400 low- and middle- income working North Carolinians about financial shortfalls faced by their households and how they managed these shortfalls when they occurred. We also held focus groups of former payday borrowers to gain an understanding of their experiences with payday lending, and the impact of payday de-authorization on their ability to manage financial shortfalls.
Our research concludes that the absence of storefront payday lending has not made a significant impact on credit availability in North Carolina. The vast majority of households surveyed report being completely unaffected by the ban. We found that households have an array of options they use to manage financial shortfalls, and the absence of a single option – in this case, payday lending, has impacted only a few. For those impacted, over twice as many report that the absence of payday lending has had a positive effect on their household rather than a negative one.
There was broad agreement that there is a need for short-term consumer credit that is more affordable and manageable than a payday loan.