Brian Melzer
Assistant Professor, Kellogg School of Management, Northwestern University
Assistant Professor, Kellogg School of Management, Northwestern University
Brian Melzer is an assistant professor in the Finance Department at Northwestern University’s Kellogg School of Management. His research interests include household finance, financial institutions and financial regulation. His recent research examines the impact of interest rate regulations in auto lending. He has also studied the default and investment behavior of heavily indebted homeowners, the costs and benefits of retail financial advice and the impact of payday loans on household well-being.
Professor Melzer received his PhD in economics from the University of Chicago Graduate School of Business in 2008. Prior to graduate study, he worked as a research analyst in the investment management business.
Brian Melzer and Aaron Schroeder
We study the effects of usury limits on the market for auto loans and find little evidence of credit rationing. We show instead that loan contracting and the organization of the loan market adjust to facilitate loans to risky borrowers. When usury restrictions bind, auto dealers finance their customers’ purchases and raise the vehicle sales price (and loan amount) relative to the value of the underlying collateral. By doing so, they arrange loans with similar monthly payments and compensate for credit risk through the mark-up on the product sale rather than the loan interest rate.