In December 2003, the Brazilian Congress passed a law that led to a natural personal lending experiment. The law allows banks to offer loans with repayment through automatic payroll deduction, which, in effect, turns future income into collateral. We estimate the impact of the new law using auto loans as a control group. The law has caused a reduction in interest rates and an increase in the volume of personal credit.

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© 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
2012
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