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THE SOCIAL and economic implications of personal borrowing and a renewed interest in consumerism have brought attention to many aspects of consumer finance. The cost behavior of small-loan operations is one of the major factors in the evaluation of regulations for the small-loan industry. The purpose of this paper is to present the results of an empirical investigation of the cost structure of consumer finance company loan branches and to discuss the results in the context of regulations on the licensing of small-loan operations and rate regulations. The scale economies issue and the loan size-cost relationship are of particular interest in this discussion. The present results are compared with previous research on the cost of small-loan operations of consumer finance companies and an attempt is made to clarify some apparent conflicts in the analysis of the scale economies issue. Present results are compared also with cost studies of commercial bank instalment loan departments. Because of the similarity of the operations in the two cases, the results are expected to be basically similar with respect to the scale economies issue.

Consumer credit is an extremely significant factor in the economic expansion of the United States. Its annual compound rate of growth over the postwar period, averaging more than 15 percent, has considerably exceeded that of virtually all other economic indicators, and this expansion rate shows no sign of lessening. The importance of consumer credit is further emphasized by the fact that it accounts for nearly one-third the total liabilities of the household sector [11, p. 142]. And from the stand-point of financial institutions, consumer loans are vital because they are characteristically the most profitable investments in lenders' asset portfolios.

The Apilado, Warner, Dauten paper is notable in several respects. The problem of credit worthiness in consumer credit is certainly critical in our credit-oriented society. The research design is innovative and shows considerable thought. The paper's conclusions are modest, yet they do represent some progress in attempting to quantify the consumer credit-granting activities of financial institutions. This review of the paper will concentrate on two areas—research design and a broad discussion of the paper's practical applicability.

Perhaps nothing illustrates so pointedly why organized labor continues its active interest in installment loan and finance legislation than a look at those whose welfare this legislation seeks to protect. One of the largest consumer finance companies in the world says that skilled and semi-skilled craftsmen comprise about 58 per cent of their customers. Another 18 per cent are in the unskilled category. Thus, more than 75 per cent are "Labor's own."

As stated in the preceding section of this article, the consumer finance companies generally were achieving reductions in operating cost ratios before World War II. To take one large company operating in many states, as an example, its operating cost ratio was reduced from 21 per cent of the loan account in 1933 to 18 per cent in 1935 and 14 per cent in 1941. The number of accounts handled per office rose from 1,759 in 1935 to 2,227 in 1941. But then operating expenses as a percentage of the loan account began to rise from 14 per cent in 1941 to 16 per cent in 1944. The major causes of the increase were the rise in salaries,l and the decline in the

The perennial controversy over the desirability of more or less direct regulation of business has generated surprisingly few empirical studies of the effects of this kind of regulation. This study illustrates the nature of the pervasive economic effects of direct regulation. It is a case study of the impact which ceilings on interest rates and maximum limits on loan sizes (here called "loan limits") have on the characteristics of loan services, the market structure, industry size, and earnings of lenders in the consumer finance industry. The consumer finance industry comprises the cash loan operations of finance companies which are regulated by special state statutes. Each state sets a single maximum limit on the sizes of loans which