In the Red: Overdrafts, Payday Lending, and the Underbanked

• 成果类型: Article
• 署名作者: Di Maggio, Marco; Ma, Angela; Williams, Emily
• 署名单位: Imperial College London; Boston College; Harvard University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13447
• 发表日期: 2025
• 页码: 1691-1738
• 关键词: liquidity constraints; consumption; loans

摘要

The reordering of transactions from high-to-low is a controversial bank practice thought to maximize fees paid by low-income customers on overdrawn accounts. We exploit a series of class-action lawsuits that mandated that some banks cease the practice. Using alternative credit bureau data, we find that after banks cease high-to-low reordering, low-income individuals reduce payday borrowing, increase consumption, realize long-term improvements in financial health, and gain access to lower-cost loans in the traditional financial system. These findings suggest that aggressive bank practices can create demand for alternative financial services and highlight an important link between the traditional and alternative financial systems.