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A new bank is considering expanding its activity from charging fees for transactions and other banking services to the market for short term loans to

A new bank is considering expanding its activity from charging fees for transactions and other banking services to the market for short term loans to low income households. However, there is very little information on many of its potential clients because many of them have very limited credit information. What problem would the bank run into if it charged an interest rate that was too high? Describe the problem and its implications.

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