Modeling the Spatial Consequences of Payday Loan Interest Rate Cap

Abstract

This study demonstrates the relevance of the spatial analysis in payday loan research and policy design and evaluation. The examination of the interplay between the regulatory and institutional environments and the need for cash permits to show the relevance of the spatial analysis. Results indicate that counties located near borders have more access to payday loans compared to distant counties. Loan acquisition costs resulting from the interest rate cap make it hard for distant Arkansans who desperately need some cash. Payday loan ‘plenty’ is visible around Arkansas borders and loan ‘desert’ is visible in the interior of Arkansas.