The Intended and Unintended Consequences of Consumer Protection Laws: An Analysis of Wage Garnishment and Usury Limits in Auto Lending

Western Finance Association Annual Meeting Paper, 2019

52 Pages Posted: 1 Aug 2018 Last revised: 17 May 2023

See all articles by Jennifer Brown

Jennifer Brown

University of Utah - Department of Finance

Mark Jansen

University of Utah - Department of Finance

Date Written: May 16, 2023

Abstract

We use novel auto financing data to examine the relation between consumer protection laws and vehicle prices, loan terms, and outcomes for subprime borrowers. After accounting for borrower creditworthiness, purchase timing, and vehicle quality, we find that state laws prohibiting post-default wage garnishment are associated with higher prices, higher initial principal balances, and higher default rates. We find no evidence that usury laws, which cap interest rates for high-risk borrowers, are associated with higher prices or default rates. We summarize our findings in terms of the distributional consequences of consumer protection regulations.

Keywords: Consumer protection, usury, lending, regulation, household finance, wage garnishment

JEL Classification: D14, D82, G28, H31, L14

Suggested Citation

Brown, Jennifer and Jansen, Mark, The Intended and Unintended Consequences of Consumer Protection Laws: An Analysis of Wage Garnishment and Usury Limits in Auto Lending (May 16, 2023). Western Finance Association Annual Meeting Paper, 2019, Available at SSRN: https://ssrn.com/abstract=3224471 or http://dx.doi.org/10.2139/ssrn.3224471

Jennifer Brown

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Mark Jansen (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
1655 Campus Center Dr.
Salt Lake City, UT 84112
United States
801-213-6910 (Phone)

HOME PAGE: http://eccles.utah.edu/team/mark-jansen/

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