| Abstract | After its inception in the early 1990s, the payday loan industry grew rapidly over the next two decades. Now, the payday lending industry represents a sizable industry, operating over 20,000 stores, lending roughly $50 billion in credit, and generating approximately $9.3 billion in revenue in 2013. Despite its size and prevalence, the payday lending industry suffers from a poor public image due to the often cited horror stories of borrowers using payday loans. As these horror stories circulate, lawmakers have responded to the calls from the public and implemented regulation on the industry in hopes of protecting the payday loan borrowers. Lawmakers justify these regulations based on moral and economic reasoning. This study details the moral reasoning and conducts a financial analysis on four publicly traded payday lenders to examine the economic reasoning. Ultimately, this study reveals that despite common belief payday lenders do not make extravagant profits when compared to traditional lenders, suggesting that that regulation on the industry must be based solely on moral or subjective reasoning, as opposed to economic reasoning. |
