Short-Term Lending Benefits Ohio's Economy

2014 Economic Impact Study & Perceptions Analysis for Ohio’s Short-term Consumer Loan Industry

by Dr. Shawn M. Rohlin, Kent State University, Department of Economics: Click for the executive summary or contact us for the full study.

After surveying nearly 4,000 short-term loan customers in Ohio, Dr. Rohlin found that short-term lending generates nearly $1 billion in spending in Ohio. The industry also increases wages by $400 million in wages and generates an employment impact equivalent to more than 10,000 jobs.

“In any industry, particularly one that is divisive, it’s important to weigh the benefits versus the cost of that industry,” Dr. Rohlin said. “The costs have been focused on in the past, but there hasn’t been much study on the industry and little is known about the costs and benefits of the industry.

“This reports finds supporting evidence of the positive impact this industry has on the lives of Ohio residents, a reality that does not get enough attention,” Dr. Rohlin said. “We found that overall more than half-a-billion –$512 million – was spent by local residents due to this industry. This is new money spent in Ohio and demonstrates the integral role the short-term consumer loan industry plays in the state’s economy.”

The study also breaks down the industry’s economic impact on a city-by-city basis throughout Ohio:

More industry studies

  • The Truth in Lending Lie by Dreher Tomkies LLP. Finance attorneys Darrell Dreher and Susan Ostrander dig into the how the Truth in Lending Act has been used to misrepresent the cost of credit and mislead legislators and regulators.
  • Measures of Reduced Form Relationship Between the Payment-Income Ratio and the Default Probability by Peter Toth, a PhD candidate in the Economics Department at the University of Texas at Austin. Toth analyzed data from 87 million loans and found no correlation between individual consumer defaults and a particular payment-to-income ratio.
  • Do Defaults on Payday Loans Matter? by Ronald Mann, a Columbia Law School professor. Professor Mann’s findings “suggest that default on a payday loan plays at most a small part in the overall timeline of the borrower’s financial distress.”
  • Payday Lending: Do outrageous prices necessarily mean outrageous profits? by Aaron Huckstep of Moss Adams LLP. Huckstep finds that the typical payday lender makes only a 3.57 percent profit margin. In comparison, the average Starbucks makes a 9 percent profit margin while traditional commercial lenders make 13 percent.
  • Payday Loan Rollovers and Consumer Welfare by Jennifer Priestley of Kennesaw State University. According to Professor Priestley, “not only did sustained usage not contribute to a negative outcome, it contributed to a positive outcome for borrowers.”