Working Paper

Prior Fraud Exposure and Precautionary Credit Market Behavior

Abstract: This paper studies how past experiences with privacy shocks affect individuals’ take-up of precautionary behavior when faced with a new privacy shock in the context of credit markets. We focus on experiences with identity theft and data breaches, two kinds of privacy shocks that either directly lead to fraud or put an individual at an elevated risk of experiencing fraud. Using the announcement of the 2017 Equifax data breach, we show that individuals with either kind of prior fraud exposure were more likely to freeze their credit report and close credit card accounts than individuals with no prior exposure immediately after the announcement. We also find that prior victims of identity theft, a more serious type of exposure, were more likely to take precautionary actions than individuals who were victims of a previous data breach.

Keywords: Equifax data breach; consumer credit; credit freeze;

JEL Classification: D14; D18; G50;

https://doi.org/10.21799/frbp.wp.2022.36

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2022-10-27

Number: 22-36