Plausibly Exogenous [1662] - Legal Enforceability (08/21/2024)

LHS Variable
Consumer lending

RHS Variable
Enforceability of debt contracts

Source of Exogenous Variation
In May 2015, a federal court unexpectedly held that the usury statutes of three states—Connecticut, New York, and Vermont—applied to certain loans that market participants had assumed were exempt from those statutes. The case introduced substantial uncertainty about whether borrowers affected by the decision were under any legal obligation to repay principal or interest on their loans.

- Honigsberg, Jackson Jr. and Squire (2017), “How does legal enforceability affect consumer lending? Evidence from a natural experiment”