The Role of Middle-Class Status in Payday Loan Borrowing: A Multivariate Approach

Payday loans refer to small-dollar, high-interest, short-term loans usually extended to lower-income consumers. Despite much research to the contrary, the payday loan industry asserts that it primarily serves middle-class Americans. This article discusses the authors' investigation of the industry's claim, by analyzing data from a U.S. bankruptcy court serving a Southern district. Results of the multivariate binary logistic regression analysis showed that, controlling for various sociodemographic and economic variables, two middle-class indicators—home-ownership and annual income at or greater than the median income—are associated with a decreased likelihood of using payday loans. The article concludes with a discussion of the implications of the results for social work practice and advocacy in regard to financial capability, particularly asset development, income maintenance, and payday loan regulation.