Lincoln Memorial University Law Review Archive


Gabriel Martin

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The United States thrives under its unique brand of federalism, allowing states to become laboratories of democracy, tailoring their innovations to meet the needs of constituents. Yet, when state governments are unable or unwilling to take action, it is incumbent upon the federal government to establish a baseline. The rather recent rise of payday loans presents a case study that illustrates a scenario where state innovation, or lack thereof, produced vastly disparate laws among the states. While some states take more consumer-friendly approaches to combat the adverse outcomes of payday loans, a majority of states have done little to quell such outcomes. As such, this note provides historical context to the development of payday loans, noting the undeniable demand in the consumer credit market and the various state and federal laws enacted to regulate these high-interest loans. In light of the state and federal inaction, and in conjunction with the overwhelming deluge of negative data surrounding payday loans’ effects on consumers, this note then outlines what the federal government should do to bridge the gap between the varying approaches of regulating payday loans.

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