Regulating Consumer Financial Products: Evidence from Credit Cards *

The Effects of Regulating Penalty Fees for Consumer Financial Products∗

We examine the welfare effects of regulation in a model where firms can shroud add-on costs, such as penalty fees for credit cards. In isolation, imposing price controls or disclosure mandates on such fees can increase or decrease welfare, even when these regulations have no direct costs. There are, however, strong complementarities between price controls and disclosure mandates: conditional on...

Consumer Lines of Credit: the Choice between Credit Cards and Helocs

Costly Mistakes in Credit Markets: Evidence from Consumer Loans

This paper studies how well borrowers choose their credit contracts and to what extent borrowers’ sophistication can be informative about their unobserved creditworthiness. To this end, I exploit a new source of quasi-experimental variation in interest rates, along with bunching methods. In the setting, the loan interest rate schedule features discrete jumps at specific loan amount thresholds, ...

Subprime Consumer Credit Demand: Evidence from a Lender’s Pricing Experiment

Using a unique panel data set from a U.K. credit card company, we analyze the interest rate sensitivity of subprime credit card borrowers. In addition to all individual transactions and loan terms, we have access to details of a randomized interest rate experiment conducted by the lender on existing (inframarginal) loans. For the whole sample, we estimate a statistically significant £3.4 reduct...

Precommitments for Financial Self-Control: Evidence from Credit Card Borrowing†

We analyze a new data set on installment borrowing decisions of a sample of customers of a credit card company. In an attempt to increase its market share, the company more or less randomly offers its customers free installments, i.e. opportunities to finance credit card purchases via installment loans at a zero percent interest rate for durations up to twelve months. We exploit these offers as...