Regulating Payday Lending

The 2017 Rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans issued by the Consumer Financial Protection Bureau (CFPB) aimed to curb debt traps and better protect consumers from predatory small-dollar lending practices. By mandating ability-to repay analyses, limiting rollovers, and enhancing disclosure requirements, the rule sought to shield borrowers from unfavorable loan terms and harmful products. This paper investigates whether the CFPB achieved its intended policy objectives by examining the impact of the 2017 rule on consumer complaints regarding payday lenders. Using the CFPB’s public Consumer Complaint Database, I employ a difference-in-difference research design that measures changes in payday loan complaint volumes around the rule’s introduction relative to a control group of mortgage loan complaints. My analysis reveals a statisticallysignificant 18.4% increase in payday loan grievances reported to the CFPB after the rule took effect. These findings reflect success in empowering and educating consumers about their rights through disclosure requirements and financial literacy efforts, with elevated grievances signaling more assertive enforcement of violations.

Author dc:creator

• Sun, Michael

Advisor dc:contributor.advisor

• Guenzel, Marius

• Finance and Financial Management

Licence dc:rights.uri

• https://creativecommons.org/licenses/by/4.0/

Repository record dc:identifier.uri

https://repository.upenn.edu/handle/20.500.14332/59982

OAI identifier oai:identifier

oai:repository.upenn.edu:20.500.14332/59982