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How do payday loans affect borrowers?: evidence from the UK market

Gathergood, John; Guttman-Kenney, Benedict; Hunt, Stefan


Benedict Guttman-Kenney

Stefan Hunt


Payday loans are controversial high cost, short-term lending products, banned in many US states. But debates surrounding their benefits to consumers continue. We analyse the effects of payday loans on consumers using a unique dataset including 99% of loans approved in the UK over a two-year period matched to credit files. Using a Regression Discontinuity research design, our results show payday loans provide short-lived liquidity gains and encourage consumers to take on additional credit. However, in the following months, payday loans cause persistent increases in defaults and cause consumers to exceed their bank overdraft limits.


Gathergood, J., Guttman-Kenney, B., & Hunt, S. (2019). How do payday loans affect borrowers?: evidence from the UK market. Review of Financial Studies, 32(2), 496–523.

Journal Article Type Article
Acceptance Date Jun 30, 2018
Online Publication Date Aug 13, 2018
Publication Date Feb 1, 2019
Deposit Date Jul 11, 2018
Publicly Available Date Mar 4, 2019
Journal Review of Financial Studies
Print ISSN 0893-9454
Electronic ISSN 0893-9454
Publisher Oxford University Press
Peer Reviewed Peer Reviewed
Volume 32
Issue 2
Pages 496–523
Keywords payday loan, sub-prime credit, consumer credit, financial distress
Public URL
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