Do Consumers Need More Protection From Small‐dollar Lenders? Historical Evidence and a Roadmap for Future Research

We summarize the current debate surrounding four small‐dollar credit products: pawn loans, vehicle title loans, payday loans, and cash installment loans from finance companies. We review the contributions of scholars that inform this debate. We underscore that users of these products fit the description of those whom consumer credit models predict benefit from these products. Many studies find that, on average, consumer use of small‐dollar credit products is, at worst, innocuous. There are, however, findings of heterogeneity in borrowers' experiences. The disagreements surrounding these credit products and the difficulty in crafting the proper policy response stems from this heterogeneity. ( JEL D18, G23)