Economic theory predicts that a binding interest-rate cap decreases credit availability for high-risk borrowers. On March 23, 2021, Illinois imposed an all-in interest-rate cap of 36 percent per annum for loans under $40,000 from non-bank and non-credit-union lenders. We use credit bureau data for Illinois and its neighboring state, Missouri, a state without any legislated interest-rate cap, to estimate the effects of the Illinois rate cap on unsecured installment loans.

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