In a recent White Paper, we analyzed the ability-to-repay (ATR) of a large sample of storefront payday borrowers, using the CFPB’s recently proposed method of computing residual cash flow available to repay a loan. In that paper, we divided borrowers into three classes: cash-flow insolvent without a loan, cash-flow solvent but having insufficient cash to make the required single payment, and sufficiently cash-flow solvent to afford the loan repayment while meeting other obligations and basic living expenses. Only this last group would qualify for a loan under CFPB requirements.
We then asked the question: is there any difference in actual repayment behavior amongst the three groups? In other words, do those with the ability-to-repay appear more likely to actually repay?
The answer is: NOT MUCH.