Based on these two continuous variables, a third variable, defined as the larger of the garnishment and wage assignment variables, was calculated for each loan.
The final model adds (to the economic and legal variables) two cross-product terms which capture the interaction between interest rate ceilings and late charges and between interest rate ceilings and garnishment or wage assignment.
The empirical results suggest that lenders in Wisconsin and Massachusetts are unable to raise interest rates above the ceiling to compensate for expected default losses associated with restrictions on garnishment, wage assignment, late charges, and attorney's fees.
The ineffectiveness of garnishment, wage assignment, late charges, and attorney's fees in influencing interest rates in Louisiana implies that factors other than rate ceilings have an important influence on borrowing and lending activity.
Such a result implies that restrictions on garnishment and wage assignment have a stronger impact on credit supply than credit demand.