Effects of Creditor Remedies and Rate Restrictions

A. The Nature of the Study This study attempts to assess the impact that restrictions on legal rate ceilings and restrictions on creditors’ abilities to collect on delinquent or defaulted debts (i.e., "creditors’ remedies") have on the consumer credit markets. The methodology employed is to study intensively the behavior of creditors in selected local consumer credit markets. The consumer credit markets studied were located in states with widely differing restrictions on rate ceilings and creditors’ remedies. By comparing consumer and creditor behavior under markedly different regulatory environments, we felt we could most readily determine where that behavior was altered by differences in the regulatory environment. The individual local credit markets selected were chosen so that they (i) were well defined, (ii) contained a fairly large proportion of individuals (particularly blue collar workers) that were likely to use consumer credit, and (iii) were, especially in the case of the Northern "paired" cities, highly similar with respect to the socio-economic characteristics of their population. The states selected for intensive study were chosen so that their regulatory schemes would fit one of the categories: (illustrated in Figure I).