The Study of payday lending in Lithuania

Abstract

Payday loans became popular very rapidly and recently, causing much controversy among general public and policymakers. The authors propose the framework of analysis and use data from extensive payday borrowers’ survey, conducted in Lithuania. Descriptive analysis of the findings is presented in order to explain the behavior of payday loan borrowers in Lithuania and suggest the right legislative response. The results indicate that in general access to payday loans is useful for borrowers. Moreover, they have alternatives available which are not used mostly because of the shame to ask for help. Findings also suggest that most of borrowers struggle with repayments, although some rollovers are not affecting the general utility of services. The authors' findings suggest that restriction of access to credit might disproportionally harm ones in need. Accordingly, authors conclude that access to credit deserves special scrutiny and very careful regulation in order to avoid unreasonable and severe consequences of legislative error.