DOI: 10.5064/f6otuzmq
title: Data for: Relational Foundations of an Unequal Consumer Credit Market: Symbiotic Ties between Banks and Payday Lenders

description: &lt;p&gt;&lt;b&gt;This is an &lt;a href="https://qdr.syr.edu/ati"&gt;Annotation for Transparent Inquiry (ATI)&lt;/a&gt; data project. &lt;/b&gt; &lt;h3&gt;The annotated article can be viewed on the &lt;a href="https://onlinelibrary.wiley.com/doi/10.1111/joca.12501#annotations:group:2Nopp9mx" &gt;Publisher's website&lt;/a&gt;. &lt;h3/&gt;&lt;/p&gt;
&lt;em&gt;You will need to use the Chrome or Edge browser with the &lt;a href="https://chrome.google.com/webstore/detail/hypothesis-web-pdf-annota/bjfhmglciegochdpefhhlphglcehbmek" target="_blank"&gt;Hypothesis extension&lt;/a&gt; installed to view the ATI annotations&lt;/em&gt;
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&lt;h3&gt;Data Generation.&lt;/h3&gt;
&lt;p&gt;My primary data come from archival financial documents available from the Securities and Exchange Commission (SEC). I examine documents from each publicly traded payday lender for their duration of their requirements to report to the SEC (or through 2014 if filing is ongoing).&lt;/p&gt;

&lt;p&gt;The SEC requires all publicly traded firms to “disclose meaningful financial and other information to the public” as part of its mission to protect investors. (see: https://www.sec.gov/Article/whatwedo.html) As part of this, the SEC makes the financial records publicly available on the EDGAR Database (https://www.sec.gov/edgar.shtml), which permits archival searches of registrations, reports, and forms.&lt;/p&gt;

&lt;p&gt;There are several types of filings that publicly traded firms must provide that are useful for this study and referred to in analysis:&lt;/p&gt;

&lt;p&gt;&lt;strong&gt;S-1: &lt;/strong&gt;Registration Statement. This is the initial registration of new securities (i.e. stocks) submitted by companies who are planning to go public.&lt;/p&gt;

&lt;p&gt;&lt;strong&gt;10-K: &lt;/strong&gt;Annual Report. This is filed 60 – 90 days after the end of each fiscal year.&lt;/p&gt;

&lt;p&gt;&lt;strong&gt;10-Q: &lt;/strong&gt;Quarterly Report. This is filed 40-45 days after the end of each fiscal quarter.&lt;/p&gt;

&lt;p&gt;&lt;strong&gt;8-K: &lt;/strong&gt;Current Report. A Current Report can be filed at any time of the year to notify investors of events that may be important for them. This includes entry into or termination of “a material definitive agreement,” including changes to their commercial credit agreement.&lt;/p&gt;

&lt;p&gt;Exhibits are also included with the above filings. Important for this research are the &lt;strong&gt;Exhibit 10&lt;/strong&gt; documents. Exhibit 10 filings pertain to material contracts, including the contracts for commercial credit agreements between the companies and banks reviewed here. In the EDGAR Database, searching by Exhibits is not possible. Instead, researchers must go to the Company Page, select the filing type (S-1, 10-K, 10-Q, 8-K), and then view related exhibits [see Doherty-Bea_Exhibit Search Process.pdf]. This limitation required that I read the filings first to identify when a new or amended/restated credit agreement was arranged between each payday lender and the banks. This was easiest to do by reading all Annual Reports (10-Ks) first. If a commercial credit agreement was amended or restated during the fiscal year, the date of this arrangement would be referenced in the Annual Report. Sometimes the Exhibit was including the 10-K filing, but if it was not, I could use the date mentioned in the report and then go back to the 10-Q or 8-K nearest to that date to which the agreement exhibit would be attached.&lt;/p&gt;

&lt;h3&gt;Data Analysis.&lt;/h3&gt;
&lt;p&gt;Data analysis occurred in several phases and required multiple reads of the archival documents.&lt;/p&gt;
&lt;p&gt;&lt;em&gt;Within-Company Process.&lt;/em&gt;First, I systematically read each Registration (S-1) and Annual Report (10-K) filed by each company in chronological order. I started with the S-1, which would be the initial filing made by the company. I then read through each Annual Report in order from earliest to latest filed. As credit agreements were renegotiated over time, I read each connected agreement in order from earliest to latest. I recorded the banks involved in each credit agreement in order to construct the network (more details in next Analytic Note).&lt;/p&gt;

&lt;p&gt;I identified themes as I read and color coded excerpts as they related to each them. Some “themes” were classifcations that allowed me to construct the figures presented in this paper: E.g., Company Operations was a theme that noted company practices, total number of storefronts, new acquisitions, and shares of revenue from payday lending. I recorded these details in a separate document to later construct Figures 1 and Figure 4. The remaining themes corresponded to different motivations for receipt of bank support (on the part of payday lenders) and motivations for financing payday lenders (on the part of the banks). Different colors were assigned to each theme, and potential excerpts were color-coded by theme.&lt;/p&gt;

&lt;p&gt;&lt;em&gt;Across-Company Process.&lt;/em&gt; After reading the within-company documents, I then read across companies’ filings to identify&lt;/span&gt;&lt;/p&gt;
&lt;p&gt;relevant passages to see how language and content varied in key passages relating to their operations, finances, and anticipated business risks. This required that I reread the S-1s and 10- Ks several times as I worked to identify motivations.&lt;/p&gt;

&lt;p&gt;&lt;em&gt;Theme Identification.&lt;/em&gt; Four of the five thematic areas regarding about motivations for financing emerged from the narratives payday lenders used in their annual and quarterly reports. I read with the following questions in mind &quot;Why do these companies need bank financing? Do these companies differ in their motivations? How so? What happens if they lose financing?&quot;&lt;/span&gt;&lt;/p&gt;

&lt;p&gt;This deep reading resulted in three key themes that are discussed in the Results Section:&lt;/p&gt;

&lt;ol&gt;
&lt;li&gt;Importance of Bank Financing for Maintaining Daily Operations&lt;/li&gt;
&lt;li&gt;Importance of Bank Financing for Storefront Expansion&lt;/li&gt;
&lt;li&gt;Mitigating Risks of Loss of Bank Financing&lt;/li&gt;
&lt;/ol&gt;

&lt;p&gt;Themes for banks’ decisions to finance payday lenders emerged primarily in the actual credit agreements that were signed by all banks and the payday lender. Similarly, I read with questions in mind: &quot;Why are banks financing payday lenders, a potential competitor?&quot; &quot;What do banks get out of this financial relationship?&quot;&lt;/p&gt;

&lt;p&gt;The key theme for banks that emerged from the credit agreements was:&lt;/p&gt;

&lt;p&gt;1) Asymmetric Information.&lt;/p&gt;

&lt;p&gt;A second theme for banks, Continued Profits from High Interest Lending, was identified in part from my review of research on the history of banks’ failed attempts to engage in more direct means of high interest lending, and via a conceptualization of how this provides revenue for banks (see Figure 3).&lt;/p&gt;

&lt;p&gt;These motivations are also discussed in detail in the results section.&lt;/p&gt;

&lt;h3&gt;Logic of Annotation.&lt;/h3&gt;
&lt;p&gt;I primarily used annotations to provide Analytic Notes, Source Excerpts, and Source Links that provided additional information about my analytic process and choice of quotes in the main text. All sources are publicly accessible through the EDGAR database links provided. Page numbers are included in the annotations if they are not already provided in the main text. Bold and Italics are presented as they appear in the financial documents, unless otherwise noted.&lt;/p&gt;

&lt;p&gt;Analytic Notes aim to provide additional information about 1) how I identified and classified eligible banks and payday lenders to use in my analysis; 2) how I constructed the bank-payday lender network using historical data; 3) how I identified information in the financial reports to create the Figures referred to in the analysis; 4) the nature of the financial documents and the content I analyzed; and/or 5) how payday lenders companies were similar (or different) in their motivations around the use of bank financing and the terms of their contracts with the banks.&lt;/p&gt;
&lt;p&gt;Finally, one Analytic Note to emphasize the standard nature of the terms of the credit arrangements between banks and payday lenders (see p. 23).&lt;/p&gt;

&lt;p&gt;Source Excerpts sought to provide additional context for quotes that appeared in the main text. Sometimes Excerpts were paired with Analytic Notes to further elaborate on the context of the statements. In some cases, I did not provide an additional source excerpt because the full scope of the explanatory content was available in the quote provided. There are a few cases where the main text summarizes a passage rather than providing a direct quote; in these cases I elected to provide the full Source Excerpt so that the reader could view the exact language that I drew my summary from (see, e.g., p. 25).&lt;/p&gt;