Payday Loans and the Secondary Financial Market

Abstract

Pay day lending has become controversial as activists, such as the Center for Responsible Lending (CRL), attempt to restrict its growth. A review of information maintained by the Oklahoma regulatory authority reveals that CRL misrepresents data in order to further its reform agenda. As a component of alternative financial services, payday loans represent a Secondary Financial Market through which borrowers unable, or unwilling, to access the Primary Financial Market can obtain credit. Regulation of payday lending is a more pragmatic approach than prohibition.

Keywords: payday lending, alternative financial services, secondary financial market

JEL Classification: G20, D20, D31