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Program in Consumer Credit & Payments

About the Program in Consumer Credit and PaymentsAbout the Program in Consumer Credit & Payments

The program in Consumer Credit & Payments is a Bank-wide effort to advance our understanding of these markets and to make this information available to industry, consumers, policymakers, researchers, and the public at large. On these pages you will find research and analysis produced by the Bank's subject matter experts in Community Development Studies and Education, the Payment Cards Center, Research, Supervision and Regulation, and other areas.

Highlights

  • Payment Cards Center UpdatesDiscussion Paper Released: Millennials with Money Revisited: Updates from the 2014 Consumer Payments Monitor

    Using results from the 2014 Consumer Payments Monitor, an annual survey fielded by Phoenix Marketing International, this paper supplements one released last year that was based on 2013 findings. The 2014 data showed continued growth in GPR prepaid card adoption among Millennials with money. The ownership rate among households headed by individuals between the ages of 18 to 32 with incomes of $100,000 or more peaked at 60 percent. Coincidentally, this rate is identical to the use of alternative financial services within this same cohort. This paper delves into young adults’ use of both traditional and alternative financial products and providers and finds evidence that may result in a reevaluation of how labels such as “alternative” and “underbanked” are applied going forward.

  • Consumer Credit and PaymentsWorking Paper Released: The Economics of Debt Collection: Enforcement of Consumer Credit Contracts

    In the U.S., creditors often outsource the task of obtaining repayment from defaulting borrowers to third-party debt collection agencies. This paper argues that an important incentive for this is creditors’ concerns about their reputations. Using a model along the lines of the common agency framework, the authors show that, under certain conditions, debt collection agencies use harsher debt collection practices than original creditors would use on their own. The model provides insight into which policy interventions may improve the functioning of the collections market.

  • Consumer Credit and PaymentsWorking Paper Released: 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.

  • Payment Cards Center UpdatesDiscussion Paper Released: Exploring the Use of Anonymized Consumer Credit Information to Estimate Economic Conditions: An Application of Big Data

    The emergence of high-frequency administrative data and other big data offers an opportunity for improvements to economic forecasting models. This paper considers the potential advantages and limitations of using information contained in anonymized consumer credit reports for improving estimates of current and future economic conditions for various geographic areas and demographic markets.

What's new

December 2015

Discussion Paper Released: Millennials with Money Revisited: Updates from the 2014 Consumer Payments Monitor

Overall growth in general purpose reloadable prepaid card ownership was not as robust between 2013 and 2014 as it was between 2012 and 2013 except in one notable segment: high income Millennials. This same demographic group also exhibited strong propensity to use alternative financial services along with traditional bank products. This paper further explores this group of “hybrid” financial services consumers. It also examines the broader use of financial services by young adults and reports on ways in which their choices differ from those of older consumers, along with evidence that conventional services are also used to the same — in some cases, even greater — degree as their parents’ and grandparents’ generations. The findings are sometimes counterintuitive, particularly with regard to some stereotypes about this young generation that have been put forth. Because of the size of this cohort, their behaviors could influence what the future of financial services consumption and delivery may look like.

November 2015

Working Paper Released: The Economics of Debt Collection: Enforcement of Consumer Credit Contracts

In the U.S., creditors often outsource the task of obtaining repayment from defaulting borrowers to third-party debt collection agencies. This paper argues that an important incentive for this is creditors’ concerns about their reputations. Using a model along the lines of the common agency framework, the authors show that, under certain conditions, debt collection agencies use harsher debt collection practices than original creditors would use on their own. This appears to be consistent with empirical evidence. The model also fits several other empirical facts about the structure of the debt collection industry and its evolution over time. The authors show that the existence of third-party debt collectors may improve consumer welfare if credit markets contain a sufficiently large share of opportunistic borrowers who would not repay their debts unless faced with “harsh” debt collection practices. In other cases, the presence of third-party debt collectors can result in lower consumer welfare. The model provides insight into which policy interventions may improve the functioning of the collections market.

Working Paper Released: 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 was small. We conclude that, in this instance, consumers primarily responded to clear and direct evidence of their own exposure to a breach. In the absence of a clear indication of their direct exposure, consumers did not appear to revise their beliefs about future expected losses associated with data breaches.

Discussion Paper Released: Exploring the Use of Anonymized Consumer Credit Information to Estimate Economic Conditions: An Application of Big Data

The emergence of high-frequency administrative data and other big data offers an opportunity for improvements to economic forecasting models. This paper considers the potential advantages and limitations of using information contained in anonymized consumer credit reports for improving estimates of current and future economic conditions for various geographic areas and demographic markets. Aggregate consumer credit information is found to be correlated with macroeconomic variables such as gross domestic product, retail sales, and employment, and can serve as leading indicators such that lagged values of consumer credit variables can improve the accuracy of forecasts of these macro variables.

October 2015

Working Paper Released: Who Is Screened Out of Social Insurance Programs by Entry Barriers? Evidence from Consumer Bankruptcies

Entry barriers into social insurance programs will be effective screening devices if they cause only those individuals receiving higher benefits from a program to participate in that program. We find evidence for this by using plausibly exogenous variations in travel-related entry costs into the Canadian consumer bankruptcy system. Using detailed balance sheet and travel data, we find that higher travel-related entry costs reduce bankruptcies from individuals with lower financial benefits of bankruptcy (unsecured debt discharged, minus secured assets forgone). When compared across filers, each extra kilometer traveled to access the bankruptcy system requires approximately $11 more in financial benefits from bankruptcy.

  • Last update: December 22, 2015

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