ACCI Conference 2024

Utilities companies have increasingly leveraged existing retail networks to serve as third-party bill payment centers or authorized agents. However, the use of payday lenders, in particular, as authorized payment centers raises critical policy questions. In this paper, we study whether financially vulnerable households are induced to take out payday loans that they otherwise would not have when given the opportunity to pay their utility bills at these locations. Our study focuses on the state of Missouri, where a 2016 regulation prohibited utility companies from allowing bill payments at payday loan outlets. Utilizing a quasi-experimental synthetic control methodology, we find that payday loan usage in Missouri decreased 0.5 percentage points following the enactment of the bill payment regulation, representing a 17.8 percent decrease in usage relative to the baseline mean in the pre-period. In ongoing work, we consider spillover effects on the usage of other alternative financial services, such as pawnshop loans, as well as broader measures of financial behavior, such as opening a bank account or the use of credit cards.

Author(s): Yiwei Zhang, Xiangchen Liu