Communities affected by natural disasters are more resilient and less likely to face foreclosure if they have access to payday loans, says a working study, “Payday Lenders: Heroes or Villains?” by researcher and University of Chicago faculty member, Adair Morse.

From the press release:

The study finds that payday lenders provide critical capital to people in disaster-struck communities. Morse found that banks and other forms of credit were no substitute for payday loans, “…banks cannot serve the welfare-enhancing role for individuals in distress that payday lenders serve.”

“My results have important policy implications,” concludes Morse. “If the existence of payday lending is valuable for those facing personal disaster in a way that other financial institutions cannot provide, then regulators should strive to make access to finance easier and more affordable, not ban it,” Morse wrote, “…if payday lending is welfare improving for at least some portion of the population, a move to ban payday lending is ill advied.”