Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322459 
Year of Publication: 
2025
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2025-6
Publisher: 
Bank of Canada, Ottawa
Abstract: 
I study the welfare consequences of regulations on high-cost consumer credit in the United States. I estimate a heterogeneous-agents model with uninsurable idiosyncratic risk, risk-based pricing of loans, and preference heterogeneity including households with self-control issues. I find that one-third of high-cost borrowers suffer from self-control issues. Noncontingent regulatory borrowing limits have distributional consequences within households with self-control issues. High-income households benefit from restrictions on borrowing because they face loose price schedules from lenders that allow them to overborrow. Low-income households face tight individually targeted loan price schedules that limit households' borrowing capacity so that borrowing restrictions cannot improve welfare over them.
Subjects: 
Credit and credit aggregates
Financial markets
Interest rates
JEL: 
E71
E2
G51
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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