Consumer Credit Research Articles

Sectoral implications of policy induced household credit expansions

This paper analyses the sectoral implications of household credit expansions in a two-sector open economy model. In the model, policy-induced expansion in banks’ willingness and ability to lend to households results in new lending, boosting aggregate demand and average wages in the nontradable sector. Under fixed relative wages and mark-up pricing in the tradable sector, wage pressures translate into inflationary pressures. The inflation-targeting central bank increases the policy rate to contain inflationary pressures. This intervention causes a real exchange rate appreciation, followed by a reduction in international competitiveness and a contraction of the tradable sector output. This way, the model illustrates that consumer credit expansions can trigger premature deindustrialisation, shifting the sectoral structure away from the high-productivity tradable sector towards the lower-productivity nontradable sector. Key macroeconomic developments from the Turkish economy between 2002 and 2013 are presented to motivate the model.

Loan to Value Ratio, KPR and KPA in Indonesia

The COVID-19 pandemic that occurred at the beginning of 2020 has caused economic growth to decline in many countries, including Indonesia. One of the steps taken with the aim of economic recovery is by increasing the consumption in credit channels or non-credit channels, such as social aid. This thesis discusses loan-to-value ratio effects on property loans, KPR, and KPA in Indonesia. Property loans, KPR and KPA, are included in consumer credits, and loan-to-value ratio is one of the macroprudential policy instruments. The method used in this thesis is Autoregressive Distributed Lag linear regression (ARDL) with property credit, KPR, and KPA as the dependent variable, the dummy variable of the loan-to-value ratio as the independent variables, and consumer credit interest rates, gross domestic product and inflation as the control variables. In addition, the interaction variable between the dummy variable of loan-to-value ratio and consumer credit interest rate is also used. The results showed that the interaction variable between the dummy variable of tightening in loan-to-value ratio and consumer credit interest rate is significant to property loans, KPR, and KPA in the long run. Furthermore, GDP and consumer credit interest rates, which are control variables, are also significant to property loans, KPR, and KPA in the long run

Prepayment and credit utilization in peer-to-peer lending

PurposeThis research analyzes borrowers' credit utilization through prepayment behavior in peer-to-peer (P2P) lending. The authors investigate factors influencing the decision to prepay and assess the role of P2P lending as an alternative source of consumer credits.Design/methodology/approachThe authors use individual loan-level data from the LendingClub, one of the largest P2P platforms in the USA. The authors use a Logit model and a sample selection model estimated by the two-stage Heckman method. The empirical analysis considers borrower-specific and loan-specific characteristics as well as macroeconomic factors.FindingsThe authors present a number of significant findings that can enhance understanding consumers' financing decisions. The authors offer evidence that borrowers are able to take advantage of cheaper loans offered by P2P lending to better manage credit card balance and consolidate debt. The authors find that borrowers tend to prepay P2P loans quickly when the aggregate cost of borrowing is low, suggesting that P2P lending offers an efficient alternative to obtain credit. This is particularly true for creditworthy borrowers that are able to take advantage of competing sources of finance. The authors' results provide evidence that P2P lending can improve consumers' optimal credit utilization.Originality/valueP2P lending has grown exponentially and has become a significant credit supplier to consumers and small businesses. While the existing literature mostly focuses on default risks, prepayment has received much less attention. This research fills in the gap and investigates borrowers' prepayment behavior in P2P loans and the role of P2P lending as an alternative source of consumer credits.

Consumers and limitation of the right to the recovery of unjust enrichment

The academic thesis analyses some interpretative problems related to the assessment of the beginning of the subjective limitation period in the case of unjust enrichment arising in the context of consumer credit relations. The author interprets the statute of limitations of the right to release of unjust enrichment in the light of the applicable de lege lata legislation, which is supplemented by the current case law. The author presents arguments indicating that the decisions of the Court of Justice of the European Union have not been properly implemented in the decision-making activity of the courts. Using case law, she provides a brief overview of the subject matter relating to unjustified enrichment in consumer law.

The impact of monetary policy and credit risk on bank credit behavior: An analysis of banks listed on the Indonesian stock exchange

The study investigates macroeconomic and bank-specific determinants of credit for commercial banks from 2010Q1–2022.Q4 in Indonesia. The banking credit is divided into an investment, working capital, and consumption credits. The study aims to address a gap in the literature since most prior studies are concentrated on developed markets. A system generalized method of moment (GMM) estimator is employed to investigate the impact of central bank rates and credit risk on credit. Dynamic-GMM estimations find that the central bank rate has a negative impact on the three types of credits. Meanwhile, non-performing loans positively impact investment and working capital credits but negatively affect consumption credit. The interaction between central bank rate and non-performing loans negatively impacts investment and working capital credits but positively affects consumption credit. This study provides managers and policymakers with timely information regarding bank credit drivers, encouraging management to take necessary measures, and policymakers may consider the importance of macroeconomic conditions while creating a bank lending policy. Similarly, it informs potential investors on how to evaluate the data when choosing a better investment option.

Buy now pay later services as a way to pay: credit consumption and the depoliticization of debt

ABSTRACT The use of buy now pay later (BNPL) services has grown rapidly in recent years. Existing research has considered the regulatory challenges they pose, but further work is required to map their significance as a means of normalizing and naturalizing debt. In response, this article focuses on the situated landscape of marketing and branding of BNPL services through analysis of their websites and apps, a walking ethnography of a large shopping centre, and interviews with BNPL customers. We find that BNPL services nurture a “structure of feeling” that is reminiscent of digitally intimate online spaces, and claim that by generating a sense of pleasure and fun they distinguish themselves from other comparatively “serious” financial services. We ultimately contend that this aids them in presenting themselves as simply a “way to pay” rather than a form of credit, arguing that this represents a significant new step in the depoliticization of debt.

Research on the Impact of Internet Consumer Credit Products on College Students' Consumption Behavior: Take Huabei as an Example

With the continuous development of science and technology, my country's Internet financial market is developing rapidly, and products have shown a trend of diversified innovation. The Internet consumer’s credit products on the market mainly include Huabei (Consumer’s Credit Pay of Ant Financial), JD Baitiao (Consumer’s Credit Pay in JD), VIPshop (Consumer’s Credit Pay in VIPS). Because these credit payments are personalized and convenient, they are loved by the majority of students. This article adopts a survey method for questionnaires, which uses Guangzhou university students as the research object to investigate and analyze the use of Huabei. Based on the results of questionnaires, it is found that some college students have the phenomenon of lack of advanced consumption and awareness when using Huabei. Although college students can alleviate short-term insufficient short -term insufficient short-term funding when using HUABEI, many borrowing platforms have not yet perfected standardized standardized management systems. There is still a place in the starting stage. In order to ensure the property security of college students, the platform should improve the construction of relevant laws and regulations, put forward suggestions on the target of the problems of college students, so that college students can establish healthy and reasonable consumption habits, and promote the development of the Internet consumer credit market.

THE ROLE OF LOCUS OF CONTROL IN CONSUMER CREDIT DEBT BEHAVIOR DURING THE PANDEMIC COVID-19 BY USING RELIGIOSITY AS A MODERATING VARIABLE

This study aims to empirically analyze the influence of locus of control variables on debtor behavior. In addition, this study also includes religiosity as a moderating variable to influence locus of control on the debtor behavior of consumption credit debtors during the Covid-19 pandemic. This research is quantitative, namely by conducting direct research on 155 respondent, objects to be analyzed using the statistical tool STATA version 14. The source of data in this study is primary data, namely, through surveys of respondents to obtain information in the form of respondents' opinions about debt management behavior during the pandemic Covid-19, the object of this research is Muslim respondents who have debt financial institutions, both Islamic/conventional and non-banking banks. The results showed that locus of control moderated by religiosity had a negative and significant effect on debt behavior so that the higher the locus of control moderated by religiosity, the lower the intensity of debt during the Covid-19 pandemic, religiosity had a positive and significant effect on debt repayment behavior where individuals who experience an increase in the locus of control moderated by religiosity will increasingly understand and carry out religious orders, namely to immediately pay off debts so that they do not become a burden in their lives. These findings indicate that the concept of locus of control can be used as an individual psychological factor to determine attitudes in making decisions on debt behavior, where individuals who have an increased locus of control are moderated by high religiosity, and these individuals have good self-control in managing debt.

PENGARUH TINGKAT SUKU BUNGA DAN INFLASI TERHADAP KREDIT KONSUMSI DI INDONESIA

The purpose of this study is to analyze the effect of interest rates and inflation on consumer credit in Indonesia. The multiple regression model is used in this study from 2018 to 2022. Interest rates and inflation are significant to affect consumer financing demand in Indonesia. The research results show that interest rates and inflation are known to influence demand for consumer financing in Indonesia. Central bank policy, as a reference and policy maker, must keep interest rates stable to channel consumer credit to people who lack funds and loans to banks to meet their consumption. The government is expected to be able to reduce the rate of inflation and make it easier for people to consume the goods they want at relatively stable prices

The Determinations of The Consumer Credit Default Probabilities in The Telecommunication Industry

The Determinations of The Consumer Credit Default Probabilities in The Telecommunication Industry

Risk and Revenue Management in the Chinese Auto Loan Industry

The automobile consumption credit business promotes the development of the automobile industry. However, the current credit system in China requires further refinement. Thus, the credit loan business is associated with certain risks, and company profits are often negatively impacted by clients who default on loans. Based on the data, this article leverages the economic and financial theories of consumer credit risk control to construct a logistic model to predict customers' default probability. Then, a quadratic regression model is established to determine the optimal commission structure to balance profitability with incentives from retail stores. Results show that the macro-level variables are negatively associated with the probability of good behavior. The personal level variables exhibit a positive association. In addition, a negative coefficient in the quadratic profit equation indicates the presence of an inverted “U” relationship between profit and commission. Corresponding suggestions are put forward.

Missing in action? Mortgage enforcement under section 126 of the Consumer Credit Act 1974

Abstract This paper sets out the true ambit of section 126 of the Consumer Credit Act 1974, noting that it requires virtually all residential mortgage agreements to be enforced by court order. Despite this, numerous commentaries on the English law of mortgage omit reference to section 126. The implications of our findings are profound. Not least, many accounts of the law of mortgage will require substantial revision, including recognition of the fact that cases such as Ropaigealach v Barclays Bank plc and Horsham Properties Group Ltd v Clark were reversed as long ago as 2008. More significant is the need to ensure that accurate knowledge of section 126 is conveyed to those who advise mortgagors at risk of possession. This is particularly the case given the ‘cost of living crisis’ and the backlog of possession claims arising out of the Covid-19 pandemic. Any mortgagees tempted to expedite recovery of mortgaged property by enforcing the mortgage extra-judicially should be directed to section 126 and the requirement it imposes to obtain a court order.

Assessment of Disruptive Life Events for Individuals Diagnosed With Schizophrenia or Bipolar I Disorder Using Data From a Consumer Credit Reporting Agency

There is a dearth of population-level data on major disruptive life events (defined here as arrests by a legal authority, address changes, bankruptcy, lien, and judgment filings) for patients with bipolar I disorder (BPI) or schizophrenia, which has limited studies on mental health and treatment outcomes. To conduct a population-level study on disruptive life events by using publicly available data on disruptive life events, aggregated by a consumer credit reporting agency in conjunction with electronic health record (EHR) data. This study used EHR data from 2 large, integrated health care systems, Kaiser Permanente Southern California and Henry Ford Health. Cohorts of patients diagnosed from 2007 to 2019 with BPI or schizophrenia were matched 1:1 by age at analysis, age at diagnosis (if applicable), sex, race and ethnicity, and Medicaid status to (1) an active comparison group with diagnoses of major depressive disorder (MDD) and (2) a general health (GH) cohort without diagnoses of BPI, schizophrenia, or MDD. Patients with diagnoses of BPI or schizophrenia and their respective comparison cohorts were matched to public records data aggregated by a consumer credit reporting agency (98% match rate). Analysis took place between November 2020 and December 2022. The differences in the occurrence of disruptive life events among patients with BPI or schizophrenia and their comparison groups. Of 46 167 patients, 30 008 (65%) had BPI (mean [SD] age, 42.6 [14.2] years) and 16 159 (35%) had schizophrenia (mean [SD], 41.4 [15.1] years). The majoriy of patients were White (30 167 [65%]). In addition, 18 500 patients with BPI (62%) and 6552 patients with schizophrenia (41%) were female. Patients with BPI were more likely to change addresses than patients in either comparison cohort (with the incidence ratio being as high as 1.25 [95% CI, 1.23-1.28]) when compared with GH cohort. Patients with BPI were also more likely to experience any of the financial disruptive life events with odds ratio ranging from 1.15 [95% CI, 1.07-1.24] to 1.50 [95% CI, 1.42-1.58]). The largest differences in disruptive life events were seen in arrests of patients with either BPI or schizophrenia compared with GH peers (3.27 [95% CI, 2.84-3.78] and 3.04 [95% CI, 2.57-3.59], respectively). Patients with schizophrenia had fewer address changes and were less likely to experience a financial event than their matched comparison cohorts. This study demonstrated that data aggregated by a consumer credit reporting agency can support population-level studies on disruptive life events among patients with BPI or schizophrenia.

Shocked by Bank Funding Shocks: Evidence from Consumer Credit Cards

Abstract Using the near universe of U.S. consumer credit cards, we show that banks transmit their wholesale funding shocks to consumers by reducing their credit card limits. Credit-constrained consumers who are unable to hedge against the transmitted shock by accessing other credit cards experience a stronger and more persistent reduction in aggregate credit card limits at the consumer level. Consequently, these credit-constrained consumers reduce their aggregate credit card borrowing. Our results document a credit card lending channel for the transmission of adverse bank shocks and show who bears the costs of fragile bank funding structures. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Financial Crises and the Transmission of Monetary Policy to Consumer Credit Markets

Abstract How does creditor health affect the pass-through of monetary policy to households? Using data on the universe of U.S. credit unions, I document that creditor asset losses increase the sensitivity of consumer credit to monetary policy. Identification exploits plausibly exogenous variation in asset losses and high-frequency identification of monetary policy shocks. Weaker lenders can respond more if they face financial frictions that easing alleviates. The estimates imply constraints on monetary policy become more costly in financial crises featuring creditor asset losses and that an additional benefit of monetary easing is that it weakens the causal, contractionary effect of asset losses. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers

AbstractOne of the most important channels through which monetary policy affects the real economy is changes in mortgage rates. This paper studies the effects of mortgage rate changes resulting from monetary policy shifts on homeowners' spending, debt repayment, and defaults. The Canadian institutional setting facilitates the design of identification strategies for causal inference, since the vast majority of mortgages in the country experience predetermined, periodic, and automatic contract renewals with the mortgage rate reset based on the prevailing market rate. This allows us to exploit quasi‐random variation in the timing of the rate reset and to present causal evidence for both rate declines and increases using detailed, representative consumer credit panel data. We find asymmetric effects of rate changes on spending, debt repayment, and defaults. Our results can be rationalized by the conventional cash‐flow effect in conjunction with changes in consumer expectations about future interest rates upon the reset. Given the pervasiveness of Canadian‐type mortgages in many other OECD countries, our findings have broader implications for the transmission of monetary policy to the household sector.

A New Look at the Effects of the Interest Rate Ceiling in Arkansas

Arkansas has been a popular place to study the effects of rate ceilings because of its exceptionally low interest rate ceiling. This paper examines the effects of the Arkansas rate ceiling on credit use by nonprime consumers in Arkansas, who are especially vulnerable to credit rationing because of the low ceiling. We compare the level and composition of consumer debt of nonprime consumers in Arkansas with that of prime Arkansas consumers and also non-prime consumers in the neighboring states. We find that nonprime consumers in Arkansas are less likely to have consumer debt and, conditional on having debt, have slightly lower levels of consumer debt than prime Arkansas consumers and nonprime consumers in neighboring states. Types of credit used by nonprime consumers in Arkansas tend to differ from those of the comparison groups. Notable is much lower use of consumer finance loans, traditionally an important source of credit for higher risk consumers. This finding suggests rate-based rationing of risky consumers. Also notable is lower use of bank credit despite federal preemption of the rate ceiling for banks. This result is consistent with banks’ traditional avoidance of risky lending.

How can we learn from a borrower’s online behaviors? The signal effect of a borrower’s platform involvement on its credit risk

Internet consumer credit services are defined as the provision of consumer credit services through internet platforms. While these services have benefited the public, they also present numerous credit management challenges, particularly in credit scoring. As a result, platforms are seeking ways to develop a more accurate and effective credit scoring system for internet consumer credit services. Using a credit application dataset from a large e-commerce platform in China, our study addresses this issue. Drawing on signaling theory, we explore how the signal of a borrower’s platform involvement intensity reflects its credit risk. We discover that a borrower with high involvement intensity pose lower credit risk, whereas that with low involvement intensity exhibit the opposite trend. Furthermore, our research reveals that a borrower's personal characteristics influence the signal effect of its involvement intensity. This is possibly due to platforms adjusting their perception of the signal effect based on prior expectations of borrower groups. Specifically, the signal effect of a borrower’s involvement intensity is stronger when it has higher involvement stability and a better credit history, and weaker when it comes from an economically developed region. Our study not only enhances understanding of credit scoring but also offers practical recommendations for developing credit assessment strategies for platforms.

Are credit scores and financial well-being associated with physical health?

ABSTRACT Consumer credit score has been used as an indicator of financial strain that could potentially impact health. Subjective financial well-being, or one’s feelings about one’s expectations, preferences, and satisfaction with their financial situation, is related to financial strain. This study examined whether subjective financial well-being mediates the association between credit score and self-reported physical health in a national representative sample. Using structural equation modeling (SEM), we test whether a mediating association exists between self-rated credit score and self-rated physical health. Results suggest that, after controlling for sociodemographic variables, those who reported higher credit scores have better health (β = 0.175, p < .001) and higher financial well-being (β = 0.469, p < .001), and those who reported higher financial well-being have better health (β = 0.265, p < .001). The mediation effect of financial well-being on the association between credit and physical health is also positive and statistically significant (β = 0.299, p < .001). Thus, subjective feelings about one’s financial situation would enhance the observed positive association between credit and health. Practice and policy implications are included.

The relationship between responsible financial behaviours and financial wellbeing: The case of buy‐now‐pay‐later

AbstractBuy‐now‐pay‐later (BNPL) in Australia is a rapidly growing payment innovation. Regulators and consumer groups have expressed concerns at the financial risks posed by BNPL. As BNPL is not regulated under consumer credit law, financial regulator and consumer groups have recommended that BNPL users adopt a range of responsible financial behaviours for their financial wellbeing. This study, using a survey of BNPL users and structural equation modelling, shows a link between most of these recommended financially responsible behaviours and financial wellbeing and that the financial behaviours of younger users (aged under 25) place them at greater risk of reduced financial wellbeing.