Payday loans and globalization in the age of the Internet – policy recommendations

Author:Roger Alain Szajngarten
Position:Department of Economics, John Jay College of Criminal Justice, City University of New York, New York, New York, USA
Pages:252-265
SUMMARY

Purpose - This study aims to analyze Payday loans and many similar products which are a relatively new phenomena in the USA, but have been rapidly expanding particularly after the 2008 financial crisis, and have taken a heavy toll on the most vulnerable members of our society. Design/methodology/approach - An extensive literature... (see full summary)

 
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Payday loans and globalization
in the age of the Internet – policy
recommendations
Roger Alain Szajngarten
Department of Economics, John Jay College of Criminal Justice,
City University of New York, New York, New York, USA
Abstract
Purpose – This study aims to analyze Payday loans and many similar products which are a relatively
new phenomena in the USA, but have been rapidly expanding particularly after the 2008 nancial crisis,
and have taken a heavy toll on the most vulnerable members of our society.
Design/methodology/approach – An extensive literature review of the key US features of payday
loans, the regulatory framework and its limitations, the issues and the most recent actions taken to date.
The review also includes work done by the European Union, the Organization for Economic
Cooperation and Development and the United Nations while discussing how the Internet and
extraterritoriality inuence the current landscape.
Findings – With the advent of globalization and the Internet, the issues associated with payday loans
have become harder to tackle, particularly in the USA, given the arcane state regulations used to
address the numerous frauds and abuses plaguing the industry. The lack of any international approach
combined with increasing cases where questionable actors leverage extraterritoriality, making
addressing the issues even more challenging.
Originality/value – This is an all-encompassing review aimed at expanding on existing approaches
to properly provide and regulate payday loans and similar alternative sources of credit in this rapidly
changing environment; pragmatic domestic and international policy recommendations are listed
accordingly.
Keywords Globalisation, Payday loans
Paper type Viewpoint
Introduction
This research paper reviews fraudulent and non-fraudulent payday loans in the
USA in light of globalization in the age of the Internet. To that effect, I reviewed
the key features of payday loans, the regulatory framework and its limitations, the
issues and the most recent actions taken to date. Finally, to propose a policy
approach in the USA, various sources in a holistic manner were incorporated,
including some of the work done by the European Union (EU), the Organization for
Economic Cooperation and Development (OECD) and the United Nations (UN),
which are all attempting, to a different extent, to deal with these increasingly vexing
issues. In the age of the Internet, we cannot approach payday loan fraud with only
the same toolkit as we had yesterday, and we need to expand on existing approaches
to properly provide and regulate this alternative source of credit in this rapidly
changing environment? Accordingly, a list of pragmatic domestic and international
policy proposals are recommended.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
JMLC
18,3
252
Journalof Money Laundering
Control
Vol.18 No. 3, 2015
pp.252-265
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2015-0016

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