A sweep study Payday loan bans, expected to be published soon in The Journal of Law and Economics, found similar trends in other states. When short-term loans disappear, it is no longer the need that demands them; many customers simply turn to other expensive forms of credit like pawn shops, or pay late fees on overdue bills, the study’s authors concluded.
Mr. Munn, who works as an oil well site geologist, first borrowed from Advance America eight months ago when his car broke down. He had saved some money, but it needed a few hundred more to pay the $ 1,200 repair bill. Then his employer, react to falling oil prices, cut wages by 30 percent. Mr. Munn has become a regular at the loan store.
He loves the neighborhood vibe of the store and the friendly staff, and he views payday loans as a way to avoid debt traps he finds more insidious.
“I don’t like credit cards,” said Munn, who is wary of high balances they make too easy to accumulate. “I could borrow from my IRA, but the penalties are huge.”
At Advance America, he said, “I come here, I pay back what I took and I get a little more for the rent and the bills. I keep the funds to an extent that I can repay with the next check. I don’t want to have more problems or debts.
Advance America, which is headquartered in Spartanburg, SC, operates offices in 29 states, including 220 in Ohio. The company is studying the proposed rules and says it is not yet sure what changes it would make to comply with them.
According to Richard P. Hackett, former deputy director of the Consumer Financial Protection Bureau, the rules would drastically change and, in some places, eliminate payday borrowing in the 36 states where lenders still operate. He left the agency three years ago and now works privately on policy research, much of it sponsored by industry companies.