The Effects of State Consumer Protection Policies During the Pandemic on the Use of Alternative Financial Services Loans

The number of people in financial distress was expected to increase in the wake of the Pandemic, with the most vulnerable populations likely suffering the most. To protect the most disadvantaged, many states implemented emergency measures, such as utility shutoffs moratorium and suspension on garnishment orders. Using data on alternative financial services loans and mainstream credit products from about 5.5 million consumers, we investigate to what extent state consumer protection policies implemented during the Pandemic impacted credit health outcomes. We find that adults living in states which implemented utility shutoff and eviction moratoria were less likely to use high-cost alternative financial service loans, such as payday loans, during the Pandemic. This result suggests that families did not turn to high-cost small dollar loans to pay for their rent and utilities bills in states with such protections. Residents of high poverty neighborhoods and subprime consumers benefitted the most from these policies. We do not find evidence that state suspensions on vehicle repossessions or garnishments affected alternative financial services products use. We also find suggestive evidence that utility shutoff moratoria reduced delinquencies in mainstream credit products, such as auto-loans and credit cards