Tower Loan Blog

The “Intended” Consequences of Passing the 36% APR Lending Law

new study, currently posted for public comment, has found that rate caps prevent Americans from accessing high-quality credit products they need and want.

Why It Matters

The study, entitled Effects of Illinois’ 36% Interest Rate Cap on Small-Dollar Credit Availability and Financial Well-being, found that after the imposition of a 36% all-in rate cap in Illinois:

  • Several lenders left the state.
  • The number of available loans to subprime borrowers was reduced by 36% (29,000)
  • Fifty-seven percent (4,700) of deep subprime borrowers were hit even harder.
  • Consumers who were still able to qualify for a loan were forced to take out larger, more expensive loans.

The Upshot

There are lots of consumers who want small dollar loans, but due to the rate cap, they cannot get them.

Woman using dry erase marker on glass

What’s Next

The study has already garnered attention from Real Clear Markets and Forbes, and AFSA is working to ensure that policymakers in Washington, D.C. and across the country are aware of the harm rate caps are causing for many American families.

The Study