Baggage of Consumer Installment Cash Lending: A New Sorting of the Suitcases

Regulation of credit use by individuals is as old as human history. Sometimes, however, rationales for aspects of regulations become lost in history to the point that current policy debates about them contain elements of mythology. Nowhere is this truer among kinds of consumer credit than for small cash installment loans. The origin of these loans as consumer protection under the Uniform Small Loan Law is often largely forgotten, and policy debates over their current regulation often betray misunderstandings. This paper discusses a group of such beliefs in a number of areas: reasons for using credit in the first place, interest rate ceilings on loans, lending profitability, loan renewals, Rule of 78s, and credit insurance. It seems that good public policy would benefit from less attention to mythology and more to actual experience.