Every year, despite the risks and high costs, millions of Americans turn to payday loans for emergency funds. To date, a top-down, regulatory approach has been the primary means of addressing the downsides of the payday lending industry. To improve protection of consumers and encourage this industry to mature, such regulation should be joined by efforts that encourage market transparency.

Earlier this year, as the Consumer Financial Protection Bureau began laying its framework for developing regulations around payday lending, its director, Richard Cordray, spoke of 'the need for emergency credit,' as long as these products 'help consumers rather than harm them.' Yet regulating this industry is not straightforward, as according to a Federal Reserve study last year, restricting access to payday lending may 'deny consumer access to credit, limit their ability to maintain formal credit standing, or force them to seek more costly alternatives.