Still More on the Consumer Credit Substitution Effect:

I have previously written on how the growth of credit card lending came about as a substitution from other less-attractive types of consumer lending. And how the current credit crunch has resulted in a sort of reversal of history, as middle-class families who are suddenly unable to get credit card and other similar loans increasingly have been resorting to alternative types of credit, such as layaway and pawn shops.

Now comes the inevitable next shoe to drop--the increasing use of payday lending by middle class consumers who have found their credit lines reduced on credit cards or otherwise unable to get access to credit, especially for urgent expenses like car repairs or to avoid bounced-check fees:

Payday loans typically a way working-class people get cash in a pinch, are increasingly being sought by middle-income families living without a cash cushion.

Lenders and others say the short-term loans are being taken out by people who used to get needed cash from a bank, a credit union or a credit card. With the recent credit crunch and recession, high-interest payday loans have become an alternative.