The Payment Cards Center provides meaningful insights into developments in consumer credit and payments that are of interest not only to the Federal Reserve but also to the industry, other businesses, academia, policymakers, and the public at large. The center carries out its work through an agenda of research and analysis as well as forums and conferences that encourage dialogue incorporating industry, academic, and public-sector perspectives.
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The Payment Cards Center (PCC) is a key contributor to the mission of the Consumer Finance Institute of the Federal Reserve Bank of Philadelphia. The PCC’s research and events are also featured on the Institute’s web pages.
Discussion Paper Released: Can Data Sharing Help Financial Institutions Improve the Financial Health of Older Americans?
This paper explores how increased data sharing among financial institutions could improve the financial outcomes of older adults suffering from cognitive impairment. Among the first signs of cognitive impairment in older adults is a decline in financial capacity, which is also a risk factor for abuse or exploitation. Banks and other financial institutions are at the front lines to monitor and detect changes in financial capacity and susceptibility to fraud and abuse. However, industry experts have found that, in many cases, no mechanism exists for financial service providers to communicate signs of cognitive impairment, abuse, or fraud to family, financial caregivers, or other financial institutions. Creating a regulatory environment whereby financial institutions can more easily share data among themselves could be an important component of a more comprehensive strategy to bridge the communication gap and reduce the frequency and severity of financial losses for older adults.
Working Paper Released: How Data Breaches Affect Consumer Credit
The authors use the 2012 South Carolina Department of Revenue data breach as a natural experiment to study how data breaches and news coverage about them affect consumers’ interactions with the credit market and their use of credit. They find that some consumers directly exposed to the breach protected themselves against potential losses from future fraudulent use of stolen information by monitoring their files and freezing access to their credit reports. However, these consumers continued their regular use of existing credit cards and did not switch lenders. The response of consumers exposed to the news about the breach only was negligible
Supersedes Working Paper 15-42.
Working Paper Released: Strategic Default Among Private Student Loan Debtors: Evidence from Bankruptcy Reform
Bankruptcy reform in 2005 restricted debtors’ ability to discharge private student loan debt. The reform was motivated by the perceived incentive of some borrowers to file bankruptcy under Chapter 7 even if they had, or expected to have, sufficient income to service their debt. Using a national sample of credit bureau files, the authors examine whether private student loan borrowers distinctly adjusted their Chapter 7 bankruptcy filing behavior in response to the reform. The authors do not find evidence to indicate that the moral hazard associated with dischargeability appreciably affected the behavior of private student loan debtors prior to the policy.
Supersedes Working Paper 15-17/R.
Commitment device theory suggests that temptations to consume addictive goods could be reduced by the regulatory removal of geographically close environmental cues. The authors provide new evidence on this hypothesis using a quasi-natural experiment, in which gambling regulators removed slot machines from some, but not all, neighborhood bars. The authors find that the removal of slot machines reduced personal bankruptcies of close neighbors (within 100 meters) but not neighbors slightly farther away. This is consistent with the removal of neighborhood slots serving as an effective spatial commitment device, which reduced close neighbors’ temptation to gamble, thus allowing them to avoid bankruptcy.