The Economics of Consumer Credit

Transcription

1 The Economics of Consumer Credit Giuseppe Bertola, Richard Disney, and Charles Grant, editors The MIT Press Cambridge, Massachusetts London, England

2 ( 2006 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. This book was set in Palatino on 3B2 by Asco Typesetters, Hong Kong and was printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data The economics of consumer credit / Giuseppe Bertola, Richard Disney, and Charles Grant, editors. p. cm. Includes bibliographical references and index. ISBN-13: (alk. paper) ISBN-10: (alk. paper) 1. Consumer credit. I. Bertola. Giuseppe. II. Disney, Richard. III. Grant, Charles (Charles Benedict) HG3755.E dc

3 Index Adjustment costs, 10 Adverse selection, 12 and credit bureaus, 39, 305, and credit card usage, 221, 259 Age, 6, 65, 76 and credit constraints, 86 and default, 78 and income in Italy, 104 Arrears, 160 Asset evolution equation, 5, 9 Associated Credit Bureaus, Inc. (ACB), 308, 312, 316, 310 Asymmetric information, 150, 294. See also Adverse selection; Moral hazard Awareness, 216 Bankruptcy, 14, 18, 77, , 222 in DMPs, 293 strategic, 224 Blood donations, 111 British Household Panel Survey (BHPS), 65 66, 154, 163, 175 Budget constraint, intertemporal, 4, 136 Buffer stock, 225 Certainty equivalence, 7 Chapter 7 bankruptcy procedure, 223, 242, 255, 266, 279, 282 Chapter 13 bankruptcy procedure, 245, 256, 282 Collateral, 11, 15, , 159, See also Loan-to-value ratios Competition and credit bureaus, 305, 362 and Italian regulations, among lenders (and overlending), 258, 328 among realtors, 166 in U.S. credit counseling, 284 Consumer confidence, 30 Consumer credit growth of, 29, levels of, 32, Consumer Credit Counseling Service (CCCS), Consumer Expenditure Survey (CEX), 87, 269 Consumer Federation of America (CFA), 319 Consumption smoothing, 4 5, 19, 136 Convention for the protection of individuals with regard to the automatic processing of personal data (COE), 42 Credit bureaus, 39, 151, 302, 312, 348 and cross-border lending, 50, 364 obligations of, 43 Credit card balances in the United Kingdom, 145 Credit card interest rates, 80 Credit constraints (rationing), 79 81, 150 and housing wealth, 136 incidence, 81 across Italy s regions, 101 Credit limits on cards, 203, 318 Credit registries private (see Credit bureaus) public, 50, 314, , 356, 363 Credit report, 301, 348 Credit scoring, 14, 77 78, 83, 151, 222, 304, 319, 348 aggregate relevance of, and gender, 86 Creditors rights, 108, 356, 361

4 376 Index Debit card, 229 use in the United States, 191 Debt burden, Debt Management Plan (DMP), , 282, 284, 287 Debtors prison, 241, 247 Debt pooler, 277 Debt repayment plans, court-supervised, 282 Decoupling payments from consumption, 231 Default decision to, 257 history of, 223 incidence of, 36 on mortgages, 262 prediction of, 78 punishment for, 13 14, 18 Demographic characteristics, 6 and card ownership in the United States, 186 and housing equity withdrawal in the United Kingdom, 171 Department stores, Discouraged borrowers, 80, 82, 120 Divorce, 37 Durable goods, 9 Dynamic budget constraint. See Asset evolution equation Education, 76 and card balances in the United States, 197 and card ownership in the United Kingdom, 157 and card ownership in the United States, 186, 190 and default, 78 Effort, 250, 268, 351 Enforcement, 77, 107 Errors in credit reports, 315, 324, Euler equation, 5, 149 Exemptions (homestead and of wealth) in bankruptcy, 242 in U.S. states, , , 268 Fair and Accurate Credit Transactions Act (FACTA), 325 Fair Credit Reporting Act (FCRA), 42, , Fair share, 280, 284, Families and Children Survey (FACS), 154, 176 FICO scores, 304 Financial accelerator, 137, 153 Financial regulation and liberalization, 94, 113, 122, 143 Forgiveness, 361 Fresh start, 247 Habit formation, 10 Hold-up problem, Home Mortgage Disclosure Act (HDMA), Household debt, incidence, 64 House-moving. See Relocation (household mobility) Housing debt, 31 Housing equity, and decision to default on mortgages, 262 Housing equity withdrawal (HEW), 137, 147, 163 Human capital, 242 Hyperbolic discounting, 227 Identity theft, 322, 327, 330 Income and card ownership in the United Kingdom, 157 and credit constraints, 83 and debt, 68, 75 Income and substitution effects, 255, 269 Informal credit, 105 Information about credit card terms, inadequate, 38 Informational rents, Information misuse, 327 Information sharing, 21 22, 39, 302 Installment payments, 15 Insurance, 242, 248, , 255, 269 Integration, of credit markets, 48 Interest rates on credit card revolving balances, 207, 225 expectations about, 87 and financial liberalization in Italy, lending vs. borrowing, 8, 11, 16, 72, 79 movements in, 33 and risk-based pricing, 326 Job insecurity. See Unemployment Judicial efficiency, 95, 108

5 Index 377 Life-cycle theory, 76, 136. See also Permanent Income Hypothesis (PIH) Liquid assets, 208 Liquidation, Liquidity and credit lines, 224 Liquidity constraints, 8 9, 16, 149 in Italy, 120 in the United States, 200 Loan-to-value ratios, 130, 144 Mail order catalogues, 156, 159, 322 Marginal utility of durable and nondurable goods, 10 linear, 5, 7 Market concentration, 305 Market entry and credit bureau membership, 362 and regulations in Italy, 114 Medical debts, 37 Mobility. See Relocation (household mobility) Moral hazard, 13 and credit bureaus, 39, 305 and creditor protection, 357 and nonexclusive loan contracts, 360 and overborrowing, 353 and wealth in bankruptcy, 254 Mortgages, 3, 17, 140 and bankruptcy, 262 fixed-rate, 136 across Italy s provinces, 98 National Foundation for Consumer Credit (NFCC), , 297n1 National Survey of Small Business Finance, 264 Negative data, 348, Nonprofit status, , 308 OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data, 40 Opt-in commercial use of personal information, 42 Opt-out, 325, 329 Overborrowing, 229, 277, 353 Owner occupancy, 31, 139 Panel Study of Income Dynamics (PSID), 257, 266 Permanent Income Hypothesis (PIH), 4, 70, 224 and credit constraints, 81 Positive data, 348, Precaution, 7, 9, 71. See also Prudence Price discrimination, 17 Privacy, 39 43, , Privatization, in Italian banking, 115 Prudence, 255 Recovery or enforcement costs, 15, 77 Rejection of credit application, 80, 82, 120 Relocation (household mobility) and bank accounts, 49 and bankruptcy, 256 and credit bureaus, 304, 306, 317, 355 and mortgage financing, 148, 166 Repayment plan, 277 Reputation, 303 Revolving credit, 197, 309 Sample selection bias, 73, 88 Saving rate, 103 and liberalization, 122 Scoring, and risk of bankruptcy, 295. See also Credit scoring Screening, 14, 150, 159 Search and switch costs, 221 Secured debt, 15 Securitization, 17 Self-control, 226 Shocks, 18, 32, 198, 242, 258, 267 macroeconomic, 30 Signaling, 150 Slavery, 241, 247 Social assistance, 260 Social capital, 95, 111 Sociological model of bankruptcy, 265, 267 Stagflation, 143 Stigma, 199, 265, 277, 282 Supply of credit, 12 21, 83, 94 and bankruptcy exemptions, 261 Survey of Consumer Finances (SCF), 73, 78, 88, , 266 Survey of Households Income and Wealth (SHIW), 65 66, 75, 80 Taxes, 105, 143 Thrift, 103 Time inconsistency, 227 Truth in Lending Act, 216 Uncertainty, 7 perceived, 105 Unemployment, 7, 37

6 378 Index Unsecured credit, 243 and home ownership in the United Kingdom, 157, 160 Usury rates, 29, 308 Utility, marginal, 5 Wealth effects, 136