Search Results
Discussion Paper
A tale of two vintages: credit limit management before and after the CARD act and Great Recession
This paper uses tradeline-level credit card data to examine initial credit limits and early credit limit increases before and after the Great Recession and implementation of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (the CARD Act). I compare two vintages of credit card accounts, those opened in 2005 and 2011; I also follow each vintage for more than two years after the account opening. In general, I find that significantly less credit was extended to approved credit card applicants in 2011 than in 2005. Accounts in the 2011 vintage started out with lower ...
Working Paper
Automated Credit Limit Increases and Consumer Welfare
In the United States, credit card companies frequently use machine learning algorithms to proactively raise credit limits for borrowers. In contrast, an increasing number of countries have begun to prohibit credit limit increases initiated by banks rather than consumers. In this paper, we exploit detailed regulatory micro data to examine the extent to which bank-initiated credit limit increases are directed towards individuals with revolving debt. We then develop a model that captures the costs and benefits of regulating proactive credit limit increases, which we use to quantify their ...