Working Paper
Predatory lending in rational world
Abstract: Regulators express growing concern over ?predatory lending,? which we take to mean lending that reduces the expected utility of borrowers. We present a rational model of consumer credit in which such lending is possible, and identify the circumstances in which it arises with and without competition. Predatory lending is associated with imperfect competition, highly collateralized loans, and poorly informed borrowers. Under most circumstances competition among lenders eliminates predatory lending.
Keywords: Predatory lending;
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Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 2006
Number: 06-2