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For Better and for Worse?

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For Better and for Worse?

Effects of Access to High-Cost Consumer Credit

Federal Reserve Board,

5 min read
5 take-aways
Audio & text

What's inside?

US states have passed various laws to tackle payday lending, but such loans could be beneficial.

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Editorial Rating



  • Innovative
  • Eye Opening


Debt is an important aspect of American life, but economic theory diverges on the consequences of credit access to human well-being. Economist Christine Dobridge specifically looks at the impact of payday loans – small, short-term, high-interest loans – on US households in this brief but informative study. Should these loans, which some critics consider predatory lending, face stringent regulation or prohibition? Or do they actually serve a useful purpose that justifies allowing people access to them? getAbstract recommends this astute report to policy makers and financial services professionals for its insights into the payday lending market.


Consumers in the United States tend to rack up huge amounts of debt. In 2013, fully three-quarters of US households used some form of credit, owing a total of $13.8 trillion. Servicing that debt takes up a good part of a household’s income – a median 16%. This high debt usage has invited criticism, but access to credit has both positive and negative consequences. Some research has suggested that credit helps people “smooth consumption over shocks,” while other studies find that debt hurts the financially inexperienced or uninformed, as well as those with “unusually strong preferences for current consumption...

About the Author

Christine L. Dobridge is an economist with the Federal Reserve System.

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