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Home | Events Archive | Consumer Protection Laws in Auto Lending

Consumer Protection Laws in Auto Lending

  • Series
  • Speaker(s)
    Jen Brown (David Eccles School of Business, United States)
  • Field
    Empirical Microeconomics
  • Location
    Erasmus University, Van der Goor Building, Room M3-03
  • Date and time

    February 10, 2020
    12:00 - 13:00


We examine the impact of consumer protection laws on loan terms and outcomes in auto financing. We find that dealers strategically adjust contracts such that similar borrowers face the same monthly payments in states with and without usury laws. However, monthly payments are higher in states that prohibit post-default collection through wage garnishment. Default rates do not vary with usury law when lenders can seek deficiency payments; however, consistent with both moral hazard and the constraints imposed by households' limited liquidity, default rates are higher where wage garnishment is prohibited. Although wage garnishment laws benefit borrowers who default, we find evidence that those who pay their debt in full face higher total observable loan costs where wage garnishment is prohibited.

co-authored with Mark Jansen