Do payday loans help the working poor?

Purpose – The purpose of this paper is twofold: to examine the plight of a particular segment of the poor – the working poor – in the USA relative to their exclusion from traditional financial markets and their patronage of the payday loan market; and to propose a framework that offers guidance to law makers in making laws/crafting policies that help the working poor gain better access to credit. Design/methodology/approach – This is a conceptual paper that reviews the literature on the payday loan market and uses its findings to propose a strategy to ameliorate the plight of the working poor. Findings – The study integrates the findings of studies on the payday loan market with theories of corporate social responsibility. Using these findings the authors develop a framework that can guide policy makers in making policies that address the exclusion of the working poor from financial markets. Research limitations/implications – As a conceptual paper based on theories, the study does not provide empirical validation. The paper develops a framework that could guide policy makers as they consider legislation to address the financial exclusion of the poor, particularly with regard to payday loans. Practical implications – The paper proposes a policy framework to solve the “debt treadmill” problems of the working poor. Social implications – The consequent improvement of the financial conditions of the working poor improves society in general. Originality/value – To the best of the knowledge, this is the first marketing paper that has proposed a structural framework to address the exclusion of the working poor from the credit markets.