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Short Title

Are Payday Loans Really Evil?

Abstract

Stagnant income and persistent debt have induced low- and middle-income households to rely on alternative financial services (AFS): buy-here-pay-here auto loans, check-cashers, payday loans, auto title loans, rent-to-own furniture and appliances, and pawnshops. A secondary financial services market has evolved to serve the secondary labor market, replete with trade associations as well as state and federal regulators. Mainstream financial institutions have marketed innovations, such as reloadable debit cards, to appeal to low- and middle-income consumers. High fees and interest rates of AFS products have fueled a volatile debate about the future of the secondary financial services market, with options including prohibition, regulation, and inclusion.

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