Regulating Poverty: Race, Business, and the Politics of Payday Lending, 1990-2015

Faced with welfare retrenchment, rising income volatility, and an exponential increase in housing costs, the U.S. working class relies on credit to make ends meet. For millions with no or low credit scores, this credit comes in the form of high-cost cash advances such as payday or auto-title loans. When these products are loosely regulated, borrowers—who are disproportionately poor and Black or Latina/o—experience extended periods of indebtedness that exacerbate existing racial wealth inequalities.

The regulation of markets that low-income households rely on to survive financially is an overlooked political arena with significant consequences for inequality. Policies such as payday lending regulation straddle two different domains—regulatory policy and welfare policy. In policy-making processes, borrowers’ preferences compete against concentrated business interests and racialized stigmas associated with debt and financial hardship.

My dissertation identifies the conditions under which state-level payday lending regulation changes in ways that reduce inequality. To analyze these dynamics, I construct an original dataset of payday lending regulation across all 50 states from 1990 through 2015. I also generate a novel measure of the financial risk faced by borrowers under different regulatory configurations. Using in-depth interviews, public hearing transcripts, roll call voting records, and demographic data, I examine the advocacy strategies, policy discourse, and patterns of political support in cases of attempted and successful policy change across place and time.

This project identifies the racial and social dynamics that shape the politics of payday lending regulation. More broadly, the project speaks to the challenges and possibilities of policy-making when target populations are affected by stigmatized experiences such as debt, addiction, or incarceration.