This study examines the causal impact of payday lending access restrictions on household consumption patterns using Ohio's 2018 Fairness in Lending Act as a quasi-experimental setting. We employ a difference-in-differences approach comparing employed, low-income households in West Virginia and Pennsylvania counties bordering Ohio (treatment group) with similar households in non-border counties (control group). Using NielsenIQ Home Scanner data from 2016-2019, we find that households losing cross-border payday lending access experienced significant decreases in total monthly spending. Disaggregated analysis reveals that spending reductions primarily occurred in necessities, particularly food, rather than discretionary items like alcohol and tobacco. Alcohol spending showed no significant change, while tobacco spending declined only marginally. These findings challenge the welfare rationale underlying payday lending restrictions, suggesting that such policies may force vulnerable populations to reduce essential consumption rather than eliminating harmful spending behaviors, potentially exacerbating rather than alleviating financial hardship among low-income households.
