Search Results
Journal Article
Consumer Debt Is High, but Consumers Seem to Have Room to Run
Real consumer debt is now higher than its prior peak during the global financial crisis, driven in part by increases in credit card debt. Although the share of credit card debt transitioning into delinquency has risen, it remains below levels seen during the global financial crisis. Moreover, debt-to-income measures remain historically low, suggesting that consumers in aggregate may have more room to run up debt before experiencing further financial stress.
Working Paper
Bankruptcy and delinquency in a model of unsecured debt
This paper documents and interprets two facts central to the dynamics of informal default or ?delinquency? on unsecured consumer debt. First, delinquency does not mean a persistent cessation of payment. In particular, we observe that for individuals 60 to 90 days late on payments, 85% make payments during the next quarter that allow them to avoid entering more severe delinquency. Second, many in delinquency (40%) have smaller debt obligations one quarter later. To understand these facts, we develop a theoretically and institutionally plausible model of debt delinquency and bankruptcy. Our ...
Discussion Paper
Just Released: Household Debt and Credit Developments in the Nation and the Region in 2011:Q1
This post gives our summary of the 2011:Q1 Quarterly Report on Household Debt and Credit, released today by the New York Fed. The report shows signs of healing in household balance sheets in the United States and the region, as measured by consumer debt levels, delinquency rates, foreclosure starts, and bankruptcies— although the regional data are somewhat mixed. The report captures the debt and credit activity of an anonymous, nationally representative panel of U.S. households.
Discussion Paper
Have Consumers Been Deleveraging?
Since its peak in summer 2008, U.S. consumers’ indebtedness has fallen by more than a trillion dollars. Over roughly the same period, charge-offs—the removal of obligations from consumers’ credit reports because of defaults—have risen sharply, especially on loans secured by houses, which make up about 80 percent of consumer liabilities. An important question for gauging the behavior of U.S. consumers is how to interpret these two trends. Is the reduction in debts entirely attributable to defaults, or are consumers actively reducing their debts? In this post, we demonstrate that a ...
Working Paper
The Impact of a Man-made Disaster on Consumer Credit Outcomes: Evidence from the 2018 Merrimack Valley Natural Gas Explosions
This paper is the first to empirically examine the impact of a man-made disaster on consumer credit outcomes. It uses the 2018 Merrimack Valley natural gas explosions as a quasi-random natural experiment and shows that the explosions had a temporary negative effect on debt balances, credit limits, and the number of delinquencies, and did not affect credit scores. The decreases in debt balances and credit limits were likely driven by a decline in credit demand when the affected individuals faced severe life disruption, great uncertainty, and negative financial shocks associated with the ...
Working Paper
Response of Consumer Debt to Income Shocks: The Case of Energy Booms and Busts
This paper investigates how consumers respond to local income shocks as a result of booms and busts in oil and gas development. Oil and gas development generates potentially large streams of income via wages and salaries to workers and royalty income to mineral rights owners. Changes in development may lead consumers to increase their spending depending on their exposure to income shocks. Using quarterly information on consumer debt and oil and gas activity, I ?nd that consumer debt increased at a peak of $840 per capita in counties with shale endowment and increased drilling. Each well ...
Working Paper
Rational but Not Prescient: Borrowing during the Fracking Boom
To study how income expectations affect borrowing, we use leased natural gas rights in Texas in the mid-2000s, which created potential for future leaseholder income without loosening credit constraints. In matching 11,000 leaseholders with non-leaseholders selected from a screened pool of 5.2 million, we find that the average leaseholder borrowed $13,000 more over the 2003–08 leasing boom. A consumption-smoothing modelindicates that leaseholders’ income expectations aligned with forecasts of persistently high natural gas prices. Yet, the unforeseeable success of fracking was associated ...
Working Paper
Minimum Wages and Consumer Credit : Impacts on Access to Credit and Traditional and High-Cost Borrowing
Proponents of minimum wage legislation point to its potential to raise earnings and reduce poverty, while opponents argue that disemployment effects lead to net welfare losses. But these arguments typically ignore the possibility of spillover effects on other aspects of households' financial circumstances. This paper examines how state-level minimum wages affect the decisions of lenders and low-income borrowers. Using data derived from direct mailings of credit offers, survey-reported usage of high-cost alternative credit products, and debt recorded in credit reports, we find that higher ...
Working Paper
Consumer debt dynamics:follow the increasers
Consumer debt played a central role in creating the U.S. housing bubble, the ensuing housing downturn, and the Great Recession, and it has been blamed as a factor in the weak subsequent recovery as well. This paper uses micro-level data to decompose consumer debt dynamics by separating the actions of consumer debt increasers and decreasers, and then further decomposing movements into percentage and size margins among the increasers and decreasers. We view such a decomposition as informative for macroeconomic models featuring a central role for consumer debt. Using this framework, we show that ...
Newsletter
What are the consequences of missed payments on consumer debts?
In order to understand better how the unfolding economic crisis is likely to affect U.S. households, this Chicago Fed Letter looks at what happens when borrowers miss debt payments and how long it takes for them to face a severe adverse consequence, such as foreclosure, wage garnishment, or repossession.