Professor Richard Squire’s co-authored article “How Does Legal Enforceability Affect Consumer Lending? Evidence from a Natural Experiment” was featured in American Banker.
Are loans bound by the bank’s “home” state rate cap, or the borrower’s “host” state rate cap? No one knows for sure. This legal uncertainty has caused nonbank investors in these loans to pull back, which, in turn, has led to a reduction in responsible and affordable online lending. Borrowers who are still trying to build credit have lost better options. According to an August study by professors at the Columbia, Stanford and Fordham law schools, “the decision reduced credit availability for higher-risk borrowers in affected states.”
