Factors affecting the location of payday lending and traditional banking services in North Carolina

Burkey, Mark L. and Simkins, Scott P. (2004): Factors affecting the location of payday lending and traditional banking services in North Carolina. Published in: The Review of Regional Studies , Vol. 34, No. 2 (2004): pp. 191-205.

Abstract

Payday lending is a relatively new and fast growing segment of the “fringe banking” industry. This paper offers a comparative, descriptive analysis of the location patterns of traditional banks and payday lenders. Utilizing a dataset at the Zip Code Tabulation Area level in North Carolina, we perform negative binomial regressions and find evidence supporting some, but not all common assertions about the location patterns of both types of institutions. A key finding is that after controlling for many covariates, race is still a powerful predictor of the locations of both banks and payday lenders.

• Item Type: MPRA Paper
• Language: English
• Keywords: payday lending, fringe banking, location analysis
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R10 - General; L - Industrial Organization > L8 - Industry Studies: Services > L89 - Other; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions

References

Anselin, Luc, 2003. Personal interview, University of Illinois, Urbana-Champaign, July.

Avery, Robert B., Raphael W. Bostic, Paul S. Calem, and Glenn B. Canner, 1997. “Changes in the Distribution of Banking Offices,” Federal Reserve Bulletin September, 707-725.

Cameron, A. Colin and Pravin K. Trivedi, 1986. “Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests,” Journal of Applied Econometrics 1(1), 29-53.

Cameron, A. Colin and Pravin K. Trivedi, 1998. Regression Analysis of Count Data. Econometric Society Monograph No. 30. Cambridge University Press: Cambridge.

Christensen, Ole F., Jesper Møller and Rasmus P. Waagepetersen, 2000. “Analysis of Spatial Data Using Generalized Linear Mixed Models and Langevin-Type Markov Chain Monte Carlo,” Research Report R-00-2009: Aalborg University.

Consumer Federation of America and U.S. Public Interest Research Group (CFA/PIRG), 2001. “Rent-a-Bank Payday Lending: How Banks Help Payday Lenders Evade State Consumer Protections,” The 2001 Payday Lender Surveys and Report. Available at: http://www.pirg.org/reports/consumer/payday/2001/, March.

Elliehausen, G. and Lawrence, E.C., 2001. “Payday Advance Credit In America: An Analysis of Consumer Demand,” Monograph No. 35, Credit Research Center, Georgetown University, McDonough School of Business: Washington, DC. Available at: http://www.cfsa.net/mediares/Reports /GeorgetownStudy.pdf, March.

Ernst, Keith, John Faris, and Uriah King, 2003. “Quantifying the Economic Cost of Predatory Payday Lending.” Center for Responsible Lending Working Paper: Chapel Hill. Available at: http://www.responsiblelending.org/pdfs/CRLpaydaylendingstudy121803.pdf, January.

Gruenewald, Paul, 2004. Personal interview, Vancouver, B.C., Canada, June.

Kidd, Robert W., 2004. “On the Outside Looking In,” Region Focus Summer, Federal Reserve Bank of Richmond. Available at: http://www.rich.frb.org/pubs/regionfocus/summer04/ontheoutside.html, January.

Kolb, Anthony, 1999. “The Spatial Analysis of Bank and Check-Cashing Locations in Charlotte, NC.” University of North Carolina, Center for Community Capitalism Working Paper: Chapel Hill, NC.

McCullagh, P. and Nelder, J.A., 1989. Generalized Linear Models. Second edition,Chapman and Hall, New York.

North Carolina Commissioner of Banks, 2001. “Report to the General Assembly on the Subject of Payday Lending.” Available at: http://www.banking.state.nc.us/reports/ccfinal.pdf, January.

Stegman, Michael A. and Faris, Robert, 2003. “Payday Lending: A Business Model that Encourages Chronic Borrowing,” Economic Development Quarterly 17(1), 8-32.

Tanoue, Donna, 2000. “Speech Before the Seventh Annual Greenlining Economic Development Summit.” Available at: http://www.fdic.gov/news/news/speeches/archives/2000/sp13June00.html, January.

Tillet, Doug, and Liz Handlin, 2003. “Tapping The Potential of the Unbanked – Private Sector Interest Increases,” Chicago Fed Letter 185a (January), Federal Reserve Bank of Chicago. Available at: http://www.chicagofed.org/publications/fedletter/2003/cfljan2003_185a.pdf , January.