In my response to Arnold Schwarzenegger and Bill Clinton’s Wall Street Journal commentary on payday loans, I mentioned a study from the Federal Reserve Bank of New York that concluded that payday loans are good for the financial health of people that use them.
Well, today another study was announced (a shout out to Mike S for finding it) that reached the same conclusion. This study was conducted by a team of researchers from George Mason University, Colby College, The University of Virginia, and the US Bureau of Economics. Here’s what they said:
We find that payday loans help the subjects to absorb expenditure shocks and, therefore, survive financially. However, subjects whose demand for payday loans exceeds a certain threshold level are at a greater risk than a corresponding subject in the treatment in which payday loans do not exist.
In other words, payday loans help people as long as they don’t abuse them. You could say the same thing about credit cards or just about any type of loan product.
As I’ve mentioned before, politicians and the media love to point to triple-digit APR’s and grandstand about predatory lending. But it’s hard to argue with the simple economic fact that millions of Americans rely on short term loans — and companies like ThinkCash and PayDay One — for their financial well being.
(Mike, those links are for you.)
Finding Balance 
what i’m interested in – you hear so much about it – is the surge of supermarket banking… the likes of Kroger or Walmart starting their own banking, credit card etc. chains… will they change the payday loan industry ?
Walmart has been unable to get approval to own a bank in the US, but they recently started offering banking in Mexico. Supermarkets could become big players in the space.