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Payday Online cash advances: Going Where the Need is Greatest
Payday online cash advances are an inescapable landmark in America’s modern economic landscape. The popularity of the short term online cash advance product has grown significantly since the early 1990s, and it’s no wonder. Giving consumers the ability to absorb financial shocks in the short term – enabling them to avoid hefty penalties – is useful for maintaining economic welfare. It is important for consumers to be educated as to their alternatives in a financial emergency, however. For their part, the payday lendingindustry (organized under such groups as the Community Financial Services Association and the Online Lenders Alliance) has helped to educate consumers as to how payday online cash advances work and when they should or shouldn’t advisably be used. However, the responsibility rightly rests with the individual.
Unfortunately, the image still persists within the popular media that payday online cash advances are an instrument through which unscrupulous businessmen and women exploit “at-risk” members of society. One of the primary means these critics use to attempt to prove their point is by focusing on the geographic clustering of brick-and-mortar payday online cash advance locations (as well as pawn shops and check cashing outlets). This fails to take into account online payday online cash advance companies and aggregators like Personal Money Store, whose average customer by income tends to fall comfortably into the middle class. However, when brick-and-mortar locations only are considered, a clear pattern of going where demand is greatest becomes apparent. A recent study by Robin Prager, the Assistant Director in the Division of Research and Statistics for the Board of Governors of the Federal Reserve System, supports the assertion that payday online cash advance businesses tend to cluster in areas where access to credit may be restricted and liquid assets that help consumers handle financial surprises may be closer to scarce than abundant.
“Determinants of the Locations of Payday Lenders, Pawnshops and Check-Cashing Outlets“
Prager groups payday online cash advances, pawn shops, check cashing and a number of related short term online cash advance companies under the name “alternative financial service providers” (AFSPs). Recognizing the controversy the rapid growth of these institutions has generated, Prager analyzes the geographic placement of AFSPs. Using county-level data for the entire country, she expands upon the regional work most studies had undertaken before. Demographics, population, consumer credit profiles and the degree of strictness in state and local laws all play a role in where the largest clusters of AFSPs appear.
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