September, 2009

Consumer Welfare and the Regulation of Title Pledge Lending

  • Todd Zywicki

    George Mason University Foundation Professor of Law, Antonin Scalia Law School, George Mason University
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In recent years, there has been growth in nontraditional lending products such as payday lending and auto title lending, and a relative decline of others, such as finance companies and pawnbrokers. Meanwhile, the onset of the financial crisis has spurred renewed scrutiny of nontraditional lending products, even though there is no suggestion much less evidence that those products contributed to the crisis, and indeed, may be playing a positive role in mitigating the fallout from the crisis. This paper seeks to show that well-intentioned but fundamentally misguided regulations that deprived consumers of access to title loans would likely force many borrowers to turn to even more expensive lenders, illegal lenders or to do without emergency funds.