Search Results
Working Paper
IDENTITY THEFT AS A TEACHABLE MOMENT
SUPERCEDES 14-28. This paper examines how a negative shock to the security of personal finances due to severe identity theft changes consumer credit behavior. Using a unique data set of linked consumer credit data and alerts indicating identity theft, we show that the immediate effects of fraud on consumers are typically negative, small, and transitory. After those immediate effects fade, identity theft victims experience persistent, positive changes in credit characteristics, including improved risk scores (indicating lower default risk). We argue that these changes are consistent with ...
Working Paper
Payment discounts and surcharges: the role of consumer preferences
We use new data from the 2015 Diary of Consumer Payment Choice to analyze price discounts and surcharges based on the payment method used for transactions. We examine consumer preferences for specific payment instruments and test whether consumer demand for payment instruments is price elastic. Specifically, we test whether consumers are likely to deviate from their preferred methods in order to get a discount or to avoid a surcharge. We find that the occurrence of price incentives is low, but consumers who preferred other payment methods had an 11.7 percent probability of switching to cash ...
Working Paper
Foreclosure delay and consumer credit performance
Supersedes Working Paper 14-8. The deep housing market recession from 2008 through 2010 was characterized by a steep rise in the number of foreclosures and lengthening foreclosure timelines. The average length of time from the onset of delinquency through the end of the foreclosure process also expanded significantly, averaging up to three years in some states. Most individuals undergoing foreclosure were experiencing serious financial stress. However, the extended foreclosure timelines enabled mortgage defaulters to live in their homes without making mortgage payments until the end of the ...
Speech
Opening remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry.
Remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry, Federal Reserve Bank of New York, New York City.
Working Paper
Are there social spillovers in consumers’ security assessments of payment instruments?
Even though security of payments has long been identified as an important aspect of the consumer payment experience, recent literature fails to appropriately assess the extent of social spillovers among payment users. We test for the existence and importance of such spillovers by analyzing whether social influence affects consumers? perceptions of the security of payment instruments. Based on a 2008?2014 annual panel data survey of consumers, we find strong evidence of social spillovers in payment markets: others? perceptions of security of payment instruments exert a positive influence on ...
Report
Anxiety in the face of risk
We model an ?anxious? agent as one who is more risk averse with respect to imminent risks than with respect to distant risks. Based on a utility function that captures individual subjects? behavior in experiments, we provide a tractable theory relaxing the restriction of constant risk aversion across horizons and show that it generates rich implications. We first apply the model to insurance markets and explain the high premia for short-horizon insurance. Then, we show that costly delegated portfolio management, investment advice, and withdrawal fees emerge as endogenous features and ...
Working Paper
Out of sight, out of mind: consumer reaction to news on data breaches and identity theft
We use the 2012 South Carolina Department of Revenue data breach to study how data breaches and news coverage about them affect consumers? take-up of fraud protections. In this instance, we find that a remarkably large share of consumers who were directly affected by the breach acquired fraud protection services immediately after the breach. In contrast, the response of consumers who were not directly exposed to the breach, but who were exposed to news about it, was negligible. Even among consumers directly exposed to the data breach, the incremental effect of additional news about the breach ...
Working Paper
The Display of Information and Household Investment Behavior
I exploit a natural experiment to show that household investment decisions depend on the manner in which information is displayed. Israeli retirement funds were prohibited from displaying returns for periods shorter than twelve months. In this setting, the information displayed was altered but the accessible information remained the same. Using differences-in-differences design, I find that this change caused reduction in fund flow sensitivity to past returns, decline in trade volume, and increased asset allocation toward riskier funds. These results are consistent with models of limited ...
Working Paper
The credit card debt puzzle: the role of preferences, credit risk, and financial literacy
We use the 1979 National Longitudinal Survey of Youth to revisit what is termed the credit card debt puzzle: why consumers simultaneously co-hold high-interest credit card debt and low-interest assets that could be used to pay down this debt. This dataset contains unique information on intelligence, financial literacy, and preferences, while also providing a complete picture of households? balance sheets. Relative to individuals with no credit card debt but positive liquid assets, individuals in the puzzle group have higher discount rates, slightly lower financial literacy scores, and very ...
Working Paper
Credit access after consumer bankruptcy filing: new evidence
Supersedes Working Paper No. 13-24 This paper uses a unique data set to shed new light on credit availability to consumer bankruptcy filers. In particular, the authors? data allow them to distinguish between Chapter 7 and Chapter 13 bankruptcy filings, to observe changes in credit demand and credit supply explicitly, and to differentiate existing and new credit accounts. The paper has four main findings. First, despite speedy recovery in their risk scores after bankruptcy filing, most filers have much reduced access to credit in terms of credit limits, and the impact seems to be long lasting ...