Money to Go
6 Pages Posted: 29 Jun 2010
Date Written: June, 29 2010
A number of recently developed consumer credit instruments, such as auto title loans, are receiving critical attention from policymakers who worry that these instruments represent “abusive lending.” This paper focuses on auto title loans, arguing that the seemingly high interest rates on these loans are fair in light of their default risk and the value of securing collateral, and that firms engaged in this lending do not reap windfall profits. The paper further argues that policymakers should be hesitant to restrict this form of credit, as it is valued by consumers and is often used by small businesses on a short-term basis to secure much-needed cash for operating expenses.
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