Abstract
AbstractDo deals with debt collectors alleviate consumer financial distress? Using new data linking court and credit registry records, we examine civil collection lawsuits where consumers can settle out of court. Random assignment of judges with different styles generates exogenous variation in the likelihood of settlement negotiations. We find that settlements increase financial distress relative to going to court, likely by draining consumers of liquidity. The effect is stronger among less financially literate consumers. Survey evidence suggests that consumers generally overestimate how much they would pay through the court system. Perceived nonpecuniary benefits also motivate some consumers to settle.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
