Who Wants to Ban Payday Loans? How the Racial Wealth Gap Shapes Policy Attitudes

• In Event: The Political Economy of Wealth Inequality

Abstract

One impact of the racial wealth gap is that Black and white Americans engage with distinct sets of financial institutions. The fringe credit industry is an example of this bifurcation - high-cost, short-term cash advances such as payday loans are disproportionately used by Black consumers, while white consumers are more likely to have better options for borrowing. How does this context shape attitudes towards regulating payday lending? Consumer advocacy groups have long lobbied to ban the fringe credit industry, and surveys suggest that there is support among the general public for such policies. But research also demonstrates that many borrowers see the industry as necessary, due to a lack of viable alternatives to the high-cost loans, and may be less likely to support a ban. I theorize that the attitudes of individuals who have personal experience with payday lending will be distinct from the attitudes of individuals who are aware of the industry, but lack personal experience. I use data from an original survey of Black and white individuals living in ZIP codes with a significant industry presence to test the relationship between race, experience, and attitudes. The findings of this study contribute to our understanding of how wealth inequality shapes policy attitudes.

Author

• Rhea Myerscough, Butler University