The Effects of Usury Laws: Evidence from the Online Loan Market

40 Pages Posted: 28 Jan 2014

See all articles by Oren Rigbi

Oren Rigbi

Ben-Gurion University of the Negev

Date Written: June 2012


Usury laws cap the interest rates that lenders can charge. Using data from, an online lending marketplace, I investigate the effects of these laws. The key to my empirical strategy is that there was initially substantial variability in states’ interest rate caps, ranging from 6% to 36%. A behind-the-scenes change in loan origination, however, suddenly increased the cap to 36%. The main findings of the study are that higher interest rate caps increase the probability that a loan will be funded, especially if the borrower was previously just "outside the money." I do not find, however, changes in loan amounts and default probability. The interest rate paid rises slightly, probably because online lending is substantially, yet imperfectly, integrated with the general credit market.

Keywords: Person-to-Person Lending, Consumer Credit, Usury Laws, Financial Market Regulation

JEL Classification: G21, G28, L81

Suggested Citation

Rigbi, Oren, The Effects of Usury Laws: Evidence from the Online Loan Market (June 2012). Review of Economics and Statistics, Vol. 95, No. 4, 2013. Available at SSRN:

Oren Rigbi (Contact Author)

Ben-Gurion University of the Negev ( email )

1 Ben-Gurion Blvd
Beer-Sheba 84105, 84105

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