STUDY: Rate Caps Hurt American Families
A new study, currently posted for public comment, has found that rate caps prevent Americans from accessing high-quality credit products they need and want.
The study, entitled Effects of Illinois’ 36% Interest Rate Cap on Small-Dollar Credit Availability and Financial Well-being, is authored by J. Brandon Bolen of Mississippi College, Gregory Elliehausen of the Board of Governors of the Federal Reserve System and Dr. Thomas Miller, Mississippi State University, Jack R. Lee Chair of Financial Institutions and Consumer Finance.
The research found that after the imposition of a 36% all-in rate cap in Illinois, several lenders left the state entirely. This reduced the number of available loans to subprime borrowers by 36% (29,000); 57% (4,700) of deep subprime borrowers by were even harder hit. The data also found that the consumers who still were able to qualify for a loan were forced to take out large loans, thereby making them more expensive.
The upshot: There are lots of consumers who want small dollar loan, but due to the rate cap cannot get them.
The study has already garnered attention from Real Clear Markets and Forbes and AFSA is working to ensure that policymakers inside the Beltway and nationwide are aware of harm rate caps are causing American families.
January 5th, 2023 by Dan Bucherer