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Journal of Undergraduate Research

Keywords

loan sharks, predatory, payday lenders, credit lenders, car title lenders

College

Family, Home, and Social Sciences

Department

Economics

Abstract

Short-term consumer credit lenders, in particular payday, pawn, and car title lenders, are seen as lenders that prey on the weak of society. This study uses a two-stage negative binomial regression to examine the “chum in the water,” determinants of the locations, of these “loan sharks,” payday and car title lenders. Using zip code level data for the state of Utah I find that the number of payday and car title lenders increase with young, single, middle income, English speaking, Hispanic populations. But I also found that these “loan sharks” locate near pawn shops. My findings indicate that these lenders are not predatory but instead locate near individuals who can pay back their loan. Their locating decisions are also based on population density and traffic flow. Therefore, I find that the lenders do not want to be predatory, but state regulations on lenders abilities to locate actually force these lenders to locate “predatorily.”

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Economics Commons

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