Payday Lending: An Interview with New York Fed Economist Don Morgan

Don Morgan

Don Morgan has raised more than a few eyebrows with his research on payday loans, “Defining and Detecting Predatory Lending” (PDF, 292 Kb). Morgan concludes that payday loans can be “welfare enhancing” because they may be the best source of short-term, easily available credit. A payday loan could help a borrower avoid missing a house, utility or car payment, for example.

Consumer advocates counter that payday lenders target the poor and uneducated, charging high fees that translate into annualized interest rates in the hundreds of percent. And while a single payday loan could be of real benefit, some payday borrowers become trapped in a devastating cycle, rolling over their loans until they are financially ruined.

Hear more about the issues in a 14-minute interview with Morgan, an economist in the Research Division of the New York Fed. He was interviewed by Bill Emmons, a senior economist in the St. Louis Fed's Supervisory Policy Analysis unit of the division of Banking Supervision and Regulation. The interview took place April 2, 2007, following a public program in St. Louis on payday lending.

Note: This file is in .mp3 format and can be played with most media players, such as iTunes, RealPlayer or Windows Media Player. If you prefer, you can right-click on the Listen button above and save the .mp3 file to your computer so that you can listen to the interview anytime.

Additional Information

• A response to Morgan's research from the Center for Responsible Lending
• An article on payday lending in the Winter 2007 issue of Journal of Economic Perspectives (PDF, 100Kb)

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