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Keywords:consumer credit 

Working Paper
Credit, Bankruptcy, and Aggregate Fluctuations

We document the cyclical properties of unsecured consumer credit (procyclical and volatile) and of consumer bankruptcies (countercyclical and very volatile). Using a growth model with household heterogeneity in earnings and assets with access to unsecured credit (because of bankruptcy costs) and aggregate shocks, we show that the cyclical behavior of household earnings growth accounts for these properties, albeit not for the large volatility of credit. We ?nd that tilting household consumption towards goods that can be purchased on credit and a slight countercyclicality in the terms of access ...
Working Papers , Paper 19-48

Working Paper
Owner-Occupancy Fraud and Mortgage Performance

We use a matched credit bureau and mortgage dataset to identify occupancy fraud in residential mortgage originations, that is, borrowers who misrepresented their occupancy status as owner-occupants rather than residential real estate investors. In contrast to previous studies, our dataset allows us to show that – during the housing bubble – such fraud was broad based, appearing in the government-sponsored enterprise market and in loans held on bank portfolios as well, and increases the effective share of investors by 50 percent. We show that a key benefit of investor fraud was obtaining a ...
Working Papers , Paper 19-53

Working Paper
Financial Consequences of Health Insurance: Evidence from the ACA’s Dependent Coverage Mandate

We study the financial effects of health insurance for young adults using the Affordable Care Act’s dependent coverage mandate as a source of exogenous variation. Using nationally repre-sentative, anonymized credit report and publicly available survey data on medical expenditures, we exploit the mandate’s implementation in 2010 and its automatic disenrollment mechanism at age 26. Our estimates show that increasing access to health insurance lowered young adults’ out-of-pocket medical expenditures, debt in third-party collections, and the probability of per-sonal bankruptcy. However, ...
Working Papers , Paper 19-54

Working Paper
Debt Collection Agencies and the Supply of Consumer Credit

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 ...
Working Papers , Paper 20-06

Working Paper
Did the ACA's Dependent Coverage Mandate Reduce Financial Distress for Young Adults?

We analyze whether the passage of the Affordable Care Act's dependent coverage mandate in 2010 reduced financial distress for young adults. U sing nationally representative, anonymized consumer credit report information, we find that young adults covered by the mandate lowered their past due debt, had fewer delinquencies, and had a reduced probability of filing for bankruptcy. These effects are stronger in geographic areas that experienced higher uninsured rates for young adults prior to the mandate's implementation. Our estimates also show that some improvements are transitory because they ...
Working Papers , Paper 18-3

Working Paper
Household Credit and Local Economic Uncertainty

This paper investigates the impact of uncertainty on consumer credit outcomes. We develop a local measure of economic uncertainty capturing county-level labor market shocks. We then exploit microeconomic data on mortgages and credit-card balances together with the crosssectional variation provided by our uncertainty measure to show strong borrower-specific heterogeneity in response to changes in uncertainty. Among high risk borrowers or areas with more high risk borrowers, increased uncertainty is associated with housing market illiquidity and a reduction in leverage. For low risk borrowers, ...
Working Papers , Paper 17-21

Working Paper
Modeling the Revolving Revolution: The Debt Collection Channel

We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending such as credit cards. Our model stresses the importance of delinquency and private information about borrower solvency. The prevalence of delinquency implies that the costs of debt collection must be borne by lenders to sustain incentives to repay debt. IT mitigates informational asymmetries, allowing lenders to concentrate collection ...
Working Papers , Paper 17-2

Working Paper
The Effects of Competition in Consumer Credit Markets

Using changes in financial regulation that create exogenous entry in some consumer credit markets, we find that increased competition induces banks to become more specialized and efficient, while deposit rates increase and borrowing costs for riskier collateral decline. However, shadow banks change their credit policy when faced with more competition and aggressively expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the form of intermediation can shape economic fluctuations. They also suggest that increased competition can ...
Working Papers , Paper 18-24

Working Paper
The Persistence of Financial Distress

Using recently available proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in the life cycle, most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of the life cycle, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of ...
Working Paper , Paper 17-14

Newsletter
Consumer Credit Trends by Income and Geography in 2001–12

As economists have tried to understand the causes of the Great Recession and its consequences for households and firms, a consensus has emerged: The severity of the recession was amplified by the rapid buildup in consumer credit leading up to it and the subsequent credit retrenchment. However, the credit cycle played out unevenly among individuals of different financial means and across different parts of the U.S. Thus, one potential key to understanding the Great Recession is documenting how credit trends varied across the distribution of income and across geography, as well as across the ...
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