Allow the Borrower Beware: Towards a Framework for Debiasing Rollover Behavior into the pay day loan Industry

Allow the Borrower Beware: Towards a Framework for Debiasing Rollover Behavior into the pay day loan Industry

Abstract

Every year, millions of Us americans sign up for pay day loans, marketed as short-term connection loans until their next payday. Described as triple-digit percentage that is annual (APRs) and mandatory balloon re re payments, numerous customers standard of the loans, forcing them to over over repeatedly expand, or rollover their initial loan. This technique is duplicated through to the debtor has the capacity to repay the key and accumulated costs. This short article provides an analysis that is behavioural of tendency of customers to rollover payday advances. Cognitive biases obtained from the behavioural economics literature are used to describe why individuals are more likely to rollover high-interest payday advances and exactly how loan providers capitalize away from a consumer’s biased decision-making. (more…)