4 . 2 Using Variation from Law Changes
The next column’s dependent variable is total loan size. Unsuprisingly, maximum size caps matter, with an estimated increase of $41 per $100 increase in the size cap. However, this is well below the one-to-one correspondence we would see if size caps are binding. Maximum loan term and rollover prohibitions also come in as significant, though the connection is less clear.
Only one variable significantly affects loan term, and that is minimum loan term. The coefficient just misses the 5% significance mark (p=0.052 ) and implies a 10-day increase in the minimum will raise lengths by 2.6 days on average. This effect is likely non-linear and concentrated among states with longer minimum loan terms. Notably, the estimate for maximum term is insignificant and economically small, suggesting it rarely if ever binds.
Price caps and size caps are the only types of regulation that are New Hampshire personal collateral loans significantly predictive of delinquency, with coefficients implying that a $10 increase in the cap on a $300 loan increases delinquency by 0.6 percentage points, and a $100 increase in the size cap increases delinquency by 0.4 percentage points. These effects are moderate relative to an overall delinquency rate of 4.3%, and the mechanism by which they might affect the rate is not certain.
One possibility is that larger and more expensive loans are simply more difficult to pay off, leading to delinquency
Four types of regulation appear predictive of repeat borrowing: price caps, maximum term limits, rollover prohibitions, and cooling-off periods. Read more