Absence of conflict of interest.
- The study's objective was to examine the impact of four types of information about payday loans on future borrowing behavior.
- The study was a randomized controlled trial that assigned payday borrowers to one of four treatment groups or a control group. The primary data source was a database of administrative and transaction data provided by participating loan stores. The authors used statistical models to compare the outcomes of the treatment and control group participants.
- The study found that providing payday borrowers with information about how their loan fees can build up over time was significantly associated with a reduction in subsequent payday borrowing.
- This study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to the intervention; other factors are likely to have contributed.
Features of the Study
The authors used a randomized controlled trial to determine whether providing borrowers with relevant financial information about payday loans might change their borrowing behavior. Using one large national payday lending company in the US, the study was conducted at 77 stores across 11 states. At the payday loan stores, adults who apply for and are granted a payday loan usually receive an envelope with their fee and due date. The stores printed additional information for the study. The treatment groups received comparative information about (1) payday loan annual percentage rates (APRs), (2) payday loan fees over time, (3) information on the average time to pay back a payday loan, or (4) a savings planner. The control group received the standard envelope without additional information. The study sample included 1,441 borrowers who were randomly assigned to one of four treatment conditions or the control group. For logistical reasons and to avoid contamination between groups at each store, the authors did not randomly assign individual borrowers into treatment and control groups. Rather, they switched the treatment type daily per store.
The primary data source in the study was a database of administrative and transaction data provided by participating stores. A total of 71 stores provided borrowing, repayment, employment, and income data on each participant from several years before and four months after the intervention. Specifically, information included the number of payday loans, the loan amount, fees paid by each borrower, the borrower's age, education level, and frequency of paycheck receipt. The authors used statistical models to compare the outcomes of the treatment and control groups.
Knowledge and skills for money management
- The study found that providing payday borrowers with information about how their loan fees can build up over time was significantly associated with the largest reduction in payday borrowing.
- The study did not find a significant relationship between borrowing and the provision of APR information, the average repayment timeline, or the savings planner.
Considerations for Interpreting the Findings
Although the study was a randomized controlled trial, the study had unknown attrition and was therefore reviewed under regression guidelines and not eligible for a high causal evidence rating. The authors did not ensure that the treatment and control groups were similar prior to the intervention by including the necessary control variables as stipulated in the review protocol (age, gender, and race). These preexisting differences between the groups—and not the informational intervention—could explain the observed differences in outcomes.
Causal Evidence Rating
The quality of causal evidence presented in this report is low, because it was a randomized controlled trial with unknown attrition and the authors did not ensure that the groups were similar before the intervention. This means we are not confident that the estimated effects are attributable to the informational intervention; other factors are likely to have contributed.