Working Paper

Debt Collection Agencies and the Supply of Consumer Credit

Abstract: This paper finds that stricter laws regulating third-party debt collection reduce the number of third-party debt collectors, lower the recovery rates on delinquent credit card loans, and lead to a modest decrease in the openings of new revolving lines of credit. Further, stricter third-party debt collection laws are associated with fewer consumer lawsuits against third-party debt collectors but not with a reduction in the overall number of consumer complaints. Overall, stricter third-party debt collection laws appear to restrict access to new revolving credit but have an ambiguous effect on the nonpecuniary costs that the debt collection process imposes on borrowers.

Keywords: household finance; consumer credit; creditor rights; contract enforcement; debt collection; law and finance;

JEL Classification: D12; D18; G18; G20; K35;

https://doi.org/10.21799/frbp.wp.2020.06

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2020-02-12

Number: 20-06

Pages: 88