In this Note, Francis examines the payday-loan industry and the existing and proposed regulations that control it. Looking through the lens of behavioral law and economics, she illustrates how some borrowers systematically underestimate their future borrowing, leading to unexpected rollover loans and imposing substantial and unnecessary costs on these borrowers. The Note also demonstrates how lenders are able to exploit these borrowers’ underestimation biases to aggravate the costs incurred in the "debt trap."

The Note begins by drawing on empirical research to offer a snapshot of the industry and the "typical" borrower of payday loans. Next, Francis sets the regulatory stage of the payday-loan industry, paying specific attention to the proposed framework under House Bill 1214. She then lays out the BLE theory with respect to payday lending, specifically showing how the underestimation bias may explain the frequency of payday-loan rollovers. Lastly, she presents a debiasing solution to increase the effectiveness of the disclosures proposed under House Bill 1214.