Prohibitions, price caps, and disclosures: A look at state policies and alternative financial product use

• Price caps and prohibitions on AFS products are associated with reduced supply.
• A 36% APR cap is associated with a 28% reduction in auto title borrowing.
• A 3% interest rate cap is associated with a 23% reduction in pawnshop borrowing.
• Prohibiting payday loans is associated with a 32% decline in payday borrowing.

This study uses nationally representative data from the 2009 National Financial Capability State-by-State Survey to examine the relationship between state-level alternative financial service (AFS) policies (prohibitions, price caps, disclosures) and consumer use of five AFS products: payday loans, auto title loans, pawn broker loans, refund anticipation loans, and rent-to-own transactions. Looking across products rather than at one product in isolation allows a focus on patterns and relationships across products. The results suggest that more stringent price caps and prohibitions are associated with lower product use and do not support the hypothesis that prohibitions and price caps on one AFS product lead consumers to use other AFS products.