BP 48: Public health implications of payday lending

The purpose of this briefing paper is to further the understanding of the potential population health impacts of payday lending. 

The 2008 financial crisis and subsequent economic recession triggered a renewed focus on the relationship between socioeconomic factors and health. Specifically the economic downturn has raised concerns around the health and wellbeing of individuals accruing or experiencing personal debt.

The paper focuses exclusively on payday lending; a controversial practice which refers to short-term loans for small amounts of money with high interest rates and fees. Payday lending is targeted toward lower income, high-risk borrowers.

The briefing paper summarises a literature review. Research papers reviewed include both quantitative and qualitative designs, evaluations, grey literature, regulatory reforms, market statistics and published expert commentary concerning payday lending. 

Key features of the current payday lending model are described and discussed, with a summary of evidence relating to health and wellbeing impacts. Evidence concerning the influence of debt on mental and physical health is summarised and ten questions and evidence-based answers seek to illuminate the current UK payday lending market. The questions include: 

1. Who uses payday lending?
2. What are payday loans used for?
3. What factors drive the demand for payday lending?
4. Do payday lenders target disadvantaged communities?
5. Do payday lenders operate irresponsibly?
6. Does payday lending encourage chronic borrowing?
7. What are the payday lending regulatory reforms?
8. Are the payday lending regulatory reforms working?
9. Is there a viable alternative to payday lending?
10. Is payday lending a risk to public health?

A number of recommendations are made with the intention of supporting the development of credible policy responses which mitigate potential detrimental impacts of payday lending on population health and wellbeing, in Scotland and beyond.