Using data gathered between the years of 1990 and 2006, a study was conducted by Petru S. Stoianovici of The Brattle Group and Michael T. Maloney, PhD of Clemson University, to determine if there was a direct correlation between individuals who take out payday loans and those who file for bankruptcy.  The study, called, "Restriction on Credit: A Public Policy Analysis of Payday Lending," found "no empirical evidence that payday lending leads to more bankruptcy filings," and also create doubt on the apparent "cycle of debt" argument that many of the industry's critics site.

Three of the several basic findings were: 1. Payday lending does not lead to more bankruptcy filings, 2. The "cyctle of debt" argument against payday lending is not supported by evidence, and 3. Restricting payday loans harms consumer welfare, reduces access, increases cost. 

A lot of the current and past legislation that has been passed in favor of higher restrictions or elimination of the payday loan industry rests on the fact that payday loans do contribute to bankruptcy and a "cycle of debt".  But, according to this study's findings, those arguments are unwarranted and flat out incorrect.

An excerpt from the study states, "There is no statistical evidence to support the 'cycle of debt' argument often used in passing legislation agains payday lending...It is hard to make a principled argument that the consumer is deceived in a payday lending contract because it is very simple in terms of the cost and structure: there are no hidden costs."

This study very clearly indicates that the issues a lot of the payday lending industry's opponents have are not founded on facts or legitimate arguments.  Payday loans provide a helpful and trustworthy service for those needing it.  This study shows that critics have been presenting unfounded accusations agains payday loans.  Statistically proven, payday loans do not negatively affect consumers.