Interest rate caps intended to protect borrowers from predatory lending may be pushing higher-risk consumers toward even riskier and more expensive credit alternatives. The dynamic raises questions about whether well-meaning regulatory limits can inadvertently worsen the financial outcomes they were designed to improve. As policymakers weigh the tradeoffs, the tension between consumer protection and market access remains a central challenge in credit regulation.
Interest rate caps drive higher-risk borrowers to riskier, more expensive sources of credit.
