Journal of Financial Services Research

, Volume 48, Issue 3, pp 235–262 | Cite as

Determinants of Short-term Lender Location and Interest Rates

  • Taylor J. Canann
  • Richard W. Evans


This study tests the degree to which payday and title lenders differentiate their store location and interest rates based on the socioeconomic characteristics of the areas in which they operate. We use store-level lender data, geographically matched IRS income data, and Census Bureau demographic data to answer these questions. In the case of lender location, we find that payday and title lenders tend to locate in areas with lower median age, a larger population of not married households, more restaurants, and more pawn shops. We also find a nonlinear relationship between lender location and individual incomes in the surrounding area. Regarding lender interest rates, we find that competition among lenders reduces average interest rates and that riskiness of borrowers, as measured by defaults, increases average interest rates. We also find that payday and title lenders have higher interest rates in areas with lower educational attainment, smaller proportions of Black residents, and fewer married households. This evidence seems to contradict the argument that payday and title lenders prey on minorities.


Consumer lending Interest rates Payday lending Lender location 

JEL Classification

C35 D22 E43 G23 



Thanks to Kerk Phillips, Dave Spencer, and Lars Lefgren for helpful comments and suggestions. Special thanks to Jason Debacker for providing access to the IRS Compliance Data Warehouse’s Individual Return Transaction File. This project benefited from the excellent research assistance of Benjamin Tengelsen and from a grant from the Consumer Credit Research Foundation. The Foundation played no role in the collection or interpretation of the data employed in this project. All errors are the authors’.

Supplementary material

10693_2014_202_MOESM1_ESM.pdf (369 kb)
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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of EconomicsBrigham Young UniversityProvoUSA

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