Consumer Credit Research Articles

Bank lending behavior and housing market booms: The Australian evidence

The emerging literature on bank lending during an asset price boom has focused on the U.S. economy before the GFC when the housing market peaked. Following this line of research, this paper studies the Australian economy with its unique banking industry and sustained housing market boom. Results from the single equation and the panel vector autoregression (PVAR) show evidence of crowding out of business loans towards housing loans in response to increased opportunities in strong housing markets, which in turn curtails business investment. In contrast to Chakraborty et al. (2018), such a crowding-out effect is evident only in the Big Four banks, which are dominant and less capital constrained lenders in the credit market. Further examination shows that regulatory advantage enjoyed by and the profit-seeking motives of the Big Four banks might underscore the findings. We do not find a significant crowding-out effect on consumer credit.

The Impact of the COVID-19 Pandemic on the Consumer Credit Market in Eurozone Countries

Theoretical background: The problem of the impact of the pandemic on the consumer credit market in Eurozone countries is important both from a cognitive point of view and from the perspective of economic practice. The current state of knowledge on the consumer credit market situation in Eurozone countries is incomplete. It is more common to find works concentrating on the effect of the pandemic on the consumer credit regulations, on the banking sector, or on evaluation of the consumer credit market situation in selected Eurozone countries, selected European countries or Europe as a whole. As a result, many accounts of the impact of the pandemic on consumer credit can be found, but there are no studies presenting the situation of the consumer credit market in Eurozone countries during COVID-19 in a comprehensive and integrated manner, simultaneously combining theoretical aspects and research results. Purpose of the article: This study has two objectives. The main objective was to examine the impact of the COVID-19 pandemic on the value of consumer credit in Eurozone countries. The specific objective was to examine the dynamics and directions of changes in the value of consumer credit during the pandemic in the Eurozone. The study hypothesis is that COVID-19 has determined the amount of household consumer credit debt in Eurozone countries, but that the determinants of this debt and the direction and strength of their impact are diverse. Research methods: The achievement of the objectives and hypothesis verification was based on a critical analysis of source texts and on quantitative research, in which time series analysis and multiple linear regression analysis were used. Main findings: It has been proven that the pandemic has influenced the tendency of households to take out credit, as well as the propensity of banks to grant credit, and that it therefore has affected the behaviour of both borrowers and lenders. We also showed that in periods of increased COVID-19 transmission, there was a low propensity for using credit, while in periods of relative suppression of COVID-19 symptoms, this tendency increased. It also has been proven that COVID-19 has unevenly affected the value of loans across countries. A significant difference was observed in the strength of the impact of individual independent variables on the value of consumer credit in the Eurozone, as well as a different direction of correlation between the variables. Moreover, significant differences were found in the number of variables influencing the value of consumer loans in individual Eurozone countries.

Accounting for Credit

This article examines differing accounts of how and why consumers use credit as well as the consequences of credit for inequality and social solidarity. We articulate these explanations as ( a) political economy, ( b) racialized, ( c) relational, and ( d) ranked accounts. The first account looks to the political economy to understand what drives credit use and its consequences. In the second, access to credit and the terms of access depend on the formal and informal rules that support a hierarchy of groups ostensibly based on racial categorization. In the third, the consumer makes decisions about how to use credit as a consequence of how she is managing the different types of relationships implicated in its use. The final account focuses on consumer credit ratings as a categorization process that consumers and businesses use when ranking individuals and when assessing the bases for solidarity; the ratings themselves shape future individual and group behaviors as well as life chances. We conclude by identifying future directions for research.

Summary of Rural Credit and Rural Residents' Consumption

Rural finance can not only provide credit services for agricultural production, but also increase the rural residents circulation of funds, stimulate rural residents to invest and consumption, the total consumption of this group can effectively drive China's economic growth, and the main form of rural finance is rural credit. China's economy has entered the new normal development stage, and the economic construction has shifted from "quantity" to "quality", and China's rural residents account for a large proportion of the consumer groups, and the consumption level of rural residents is related to the overall consumption level of China. Therefore, the credit business in rural finance should be valued, and this paper tries to explore the relationship between rural credit and rural residents' consumption.

Legal Mechanism for Countering Illegal Activities in the Provision of Consumer Credit: Current State and Prospects for Improvement

The high profitability of consumer credit activities, supported by growing demand, has determined the formation of an illegal sector of financial services provided by entrepreneurs on behalf of an individual. Not being among the entities authorized to provide consumer credit services, these persons are not only not burdened with the Bank of Russia control, but are also invulnerable to the law. In order to protect the rights of consumers of financial services, in 2021 the legislator criminalized illegal activities for the provision of consumer loans (loans) (Article 171.5 of the Criminal Code of the Russian Federation) and changed the content of the related Article 14.56 of the Administrative Code of the Russian Federation. Having deviated from the rules of legal writing when formulating Article 171.5 of the Criminal Code of the Russian Federation and burdening the composition with administrative prejudice, without eliminating the reasons for the low effectiveness of the application of Article 14.56 of the Administrative Code of the Russian Federation, the legislator blocked the implementation of Article 171.5 of the Criminal Code in practice. According to the author, the inevitability of administrative liability of illegal creditors can be ensured by excluding restrictions on the subject from Part 1 of Article 14.56 of the Administrative Code of the Russian Federation, as well as changing the approach to determining the end of the specified offense, linking it not with the date of conclusion of the contract, but with the date of presentation by the creditor of documents for the organization of enforcement of court decisions on debt collection. The implementation of administrative responsibility, as well as a change in the judicial practice of debt collection in favor of the pawnbroker, which excludes the «interests» of the illegal creditor from the sphere of state protection, will prevent illegal actions in the financial market, and eliminate the need for a criminal ban. The preservation of the criminal act will require changes in Article 171.5 of the Criminal Code of the Russian Federation, the author’s version of which is proposed in the paper.

The interaction between domestic monetary policy and macroprudential policy in Israel

The global financial crisis (GFC) triggered the use of macroprudential policies imposed on the banking sector. Using bank-level panel data for Israel for the period 2004–2019, we find that domestic macroprudential measures changed the composition of bank credit growth but did not affect the total credit growth rate. Specifically, we show that macroprudential measures targeted at the housing sector moderated housing credit growth but tended to increase business credit growth. We also find that accommodative monetary policy surprises tended to increase bank credit growth before the GFC. We show that accommodative monetary policy surprises increased consumer credit when interacting with macroprudential policies targeting the housing market. Accommodative monetary policy interacted with nonhousing macroprudential measures to increase total credit.

Fertility-Household Credit Burden Nexus at the Present Stage

The article examines the relationship between fertility and household credit burden using data for 79 countries for the period from 1990 to 2019. The authors identify 9 patterns describing the mutual influence of fertility and household debt burden. The analysis of patterns shows that the presence of a significant positive impact of households’ mortgage debt burden on fertility in future periods may indicate both a direct causal relationship between the indicators and the adoption of conditional decisions on pregnancy planning prior to obtaining mortgage loans to improve housing conditions. The same is true for households’consumer credit burden, as well as for quantitative estimates of the impact of fertility growth on households’ debt burden in subsequent periods. The article shows that in developed and developing countries, the growth of the total fertility rate is positively associated with the subsequent dynamics of mortgage and consumer loans in relation to GDP. In developed countries, the growth of mortgage and consumer loans is positively associated with the subsequent fertility dynamics. In developing countries, an increase in mortgage loans is positively but insignificantly correlated with fertility in the following years, while an increase in consumer loans leads to an increase in fertility in the short term, and to its decrease in subsequent years. The results indicate that success in demographic policy aimed at increasing fertility will be accompanied by the growth of households’debt burden, and therefore in subsequent periods households will be forced to pay interest and repay the principal debt, which will reduce families’ ability to finance children’s education. In this regard, state programmes that provide free education and development of children should be conducted in parallel with the implementation of demographic policy aimed at increasing fertility.

Research on the Method of Predicting Consumer Financial Loan Default Based on the Big Data Model

With the continuous advancement of Internet technology and the continuous development of big data model applications, the data model is a method of data organization and storage, which emphasizes the reasonable storage of data from the perspective of business, data access, and use. The rapid development of information technology on the Internet and the increasing consumption level of people have created conditions for the booming development of consumer finance. Compared with traditional lending methods, more and more consumers are more inclined to choose consumption channels such as the Internet and e-commerce. Consumer finance lending is more convenient and fast. The prediction of consumer financial loan default is very important, because the inaccuracy of the prediction not only leads to the loss of profits but also infringes the rights and interests of consumers. Therefore, it is very important to propose a default prediction method in the consumer finance field with good performance based on the big data model. Simulation experiment conclusions are shown as follows: (1) the pseudo R -squared value of the model is 0.3660, indicating that the control variable can better explain the change of y . (2) The chi-square test statistic is equal to 51632.31, the degree of freedom is 68, and the corresponding P < 0.0001 , which also shows that the entire model can significantly predict the change of y . (3) The regression coefficient of the number of loan performances is -0.207553, indicating that the number of consumer loans is negatively correlated with loan defaults. (4) The regression coefficient of the monthly loan frequency is 0.0500152, indicating that the customer applies the frequency of personal credit consumer loans which is positively correlated with loan defaults. (5) The accurate prediction ratio of the model is 86.11%, which further shows that the prediction model has a better effect.

Banking relationship and default priority in consumer credit: Evidence from Thai microdata

Banks play an important role in consumer credit, and when borrowers face a decision on whether to default on mortgage or non-mortgage loans first, banking relationship may matter. Our study provides first evidence into the interplay between banking relationship and consumer default priority via credit bureau data of 1 million individuals in Thailand. We find that same-bank borrowers are less likely to default on mortgage loans first, and borrowers with longer banking relationship and lower switching cost are more likely to default on mortgage loans first (which is welfare-improving). Our results suggest that banking relationship can lead to better outcomes for defaulting borrowers even when switching cost is high.

Consumer over-indebtedness: A review and future research agenda

Consumer over-indebtedness has increased globally in recent decades, along with consumer credit. This article presents a systematic literature review on the topic of consumer over-indebtedness, consolidating extant knowledge, identifying broad patterns, and establishing future directions for this fast-growing research domain. We develop a comprehensive analysis and integrative review of the topic, analyzing 136 articles published in 76 journals over 50 years (from 1969 to 2019) across the academic disciplines of Economics, Marketing, Finance, Psychology, and Social Sciences. We present a framework for organizing the literature streams, theories, and main variables related to consumer over-indebtedness. Finally, we identify inconsistencies and under-researched areas, suggesting a future research agenda relevant to academics, practitioners, and policymakers.

Credit offering strategy and dynamic pricing in the presence of consumer strategic behavior

The dramatic growth of consumer credit market induces online platforms to adapt their operations in response to credit offering strategy when facing consumer strategic behavior. This study proposes a two-period pricing model for investigating platforms’ offering strategy of consumer credit and responding pricing policy, considering consumer strategic behavior and hassle cost from the credit. Consumers are heterogeneous in their disposable personal income (DPI) and valuations for the product, and are strategic in choosing the purchase timing to optimize their valuations. We find that the platform is willing to offer the credit when both the credit risk and the credit hassle cost are not sufficiently high, and the interest-free credit is sometimes more attractive over non-interest-free credit. In response to credit offering, the first and second period prices decrease as compared to the conventional case with no consumer credit, resulting in the increased first period demand and decreased second period demand. In addition, the platform's credit offering may mitigate consumer waiting behavior because of the direct effect of diminished passive waiting for consumers with low DPIs. Interestingly, credit offering may aggravate consumer strategic waiting. This may lead to an increased profit loss due to strategic consumer. Moreover, the proportion of consumers with high DPIs is critical for the platform in determining the credit offering strategy and pricing decision. Extended analyses uncover that positive spillover and network effects increase the platform's incentive to offer the credit. Surprisingly, credit offering may alleviate consumer strategic waiting when the strength of network effects is strong and hassle cost is low, and the platform's role, acting as a reseller or a marketplace has no qualitative effect on the consumer's strategic behavior.

Who's Keeping Score?: Oversight of Changing Consumer Credit Infrastructure

Access to credit in the United States is contingent upon an individual obtaining the “right” credit score. Yet the opaque scoring system makes it nearly impossible for an individual to break out of a cycle of low credit ratings and participate in the benefits of the American economy. Partially as a response, alternative credit rating products now use personal nonfinancial data for automated credit decision‐making, purportedly intended to expand access to credit. Social media activity, college grades, and even what time of day a person applies for a loan are examples of data points used for this purpose. However, these and other alternative data can be highly correlated with protected traits, such as race and national origin. While extending access to credit equitably across society is an important goal, the cure should not exacerbate the same inequalities that it is designed to address. The necessity of credit for the modern consumer compels continued oversight of the credit infrastructure to ensure fair data practices and to hold participants accountable. This article contends that consumer access to a fair credit score is a necessity, and that the consumer credit infrastructure should be viewed as a modern utility and subject to additional oversight. A proposal is then advanced that establishes fair data duties for credit scoring entities.

Measuring the Quality of Cooperative’s Savings and Credit Services from Their Members’ Perspective

Cooperatives are vital contributors in the socio-economic development of our society as they help in attaining better quality of life for their members. With the fact that the value of the cooperative to members lies primarily in the use of its services, an attention must be drawn to develop quality products and services based on their members’ needs, interests and expectations. It is imperative that cooperatives regularly assess its members’ satisfaction to further improve member retention, service offers and attract more members. This study examined the service quality and levels of satisfaction derived by members in the savings, lending and consumer credit services of a multi-purpose cooperative in Marawi City. This research employed quantitative techniques and supplemented by qualitative methods. The conceptual framework of service quality model known as SERVQUAL was conducted with multi-purpose cooperative members as the respondents of the study. The sample size of 276 respondents was derived using Cochran’s Formula. Cronbach alpha values for each dimension in both expectations and perceptions was deemed acceptable with ≤ 0.70 values. Aside from SERVQUAL Gap Score, this study used SPSS software and employed the statistical tools of mean, percentage, ranking, frequency and ranking in the interpretation and analysis of data. Paired t test was also conducted to compare the differences between member expectations and perceptions on their cooperative’s service quality. The findings of the study revealed that there exists a negative gap for the cooperative’s service quality, hence a que for quality improvement. Results showed that management should focus on responsiveness dimension, followed by reliability, then tangibles, assurance and empathy dimension. Using the weighted gap and incorporating the importance weights, this study presented a useful diagnosis and recommendations for the cooperative management in prioritizing service quality improvement. The implication of this study is the ease of use and adaptability of SERVQUAL in regularly assessing and continually improving cooperative’s savings, credit and lending services.

Verbraucherkredit als Daseinsvorsorge?

AbstractThe COVID-19 pandemic has shown once again that it is often the poor who suffer from economic downturn in times of crisis. As was the case in the financial crisis of 2008, we now have an opportunity to rethink the role of consumer credit in society and design and create a legal framework that adequately reflects that role. The following thought experiment hopes to give impetus to legal reforms.

Personal bankruptcy and consumer credit delinquency: The case of personal finance education

Given the increasing complexities of the financial markets as well as a shift away from employer/government sponsored pensions to individuals managing their retirement funds, personal finance education is an important tool in order to navigate the evolving and complex financial environment. In this paper, I examine the impact of personal finance education on credit delinquency. Prior studies show that financial literacy affects financial decisions such as savings, retirement planning, wealth accumulation and stock market participation. Using U.S data on personal bankruptcy and consumer credit delinquency rates, I show that personal finance education is important in reducing personal bankruptcy as well as consumer credit delinquency rates. Furthermore, personal finance education does not appear to moderate the impact of gambling legislation on personal bankruptcy or consumer credit default.

The Impact of Smoking on Poverty: Evidence from Indonesia

This study investigates the impact of cigarette consumption on poverty incidents in Indonesia, control for Regional Gross Domestic Products, Consumption Credit, Human Development Index, and Unemployment. The data is obtained from the Bureau of Statistical Center (BPS) and the Financial Services Authority (OJK). The analysis is conducted by employing the Static Panel Data Model, namely Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM). Among the three, REM is the best model according to Chow and Hausman Test. The finding shows that cigarette consumption in Indonesia tends to worsen poverty, indicated by the positive and significant relationship between cigarette consumption and poverty in REM analysis. Moreover, RGDP also has a significant and positive effect on poverty. It means that RGDP is not able to reduce poverty in Indonesia. Hence, it can be concluded that the impact of cigarette consumption in increasing poverty outweighs the impact of cigarette production in decreasing poverty through RGDP.

The Effect of Banks and Cooperatives in Improving Welfare

The use of cooperative credit in Indonesia is considered one of Indonesia's supporting economies. Generally, banks in Indonesia have a lower interest rate than cooperative loans. This study wants to identify the impact of cooperative credit on public welfare compared to bank loans. This study uses Indonesian Family Life Survey (IFLS) data with a regression analysis of fixed-effect methods at the village level. The results showed that the role of cooperative and bank credit did not have a significant difference in improving people's welfare. Cooperatives have an essential role in improving people's welfare as well as the bank. The higher the amount of credit taken; the more positive effect is on improving people's welfare. The use of credit for productive purposes also has a more positive influence on improving people's welfare than consumer credit.

Effect of inflation, consumption credit on purchase power of the community

The people's purchasing power as seen through per capita expenditure adjusted for the province of West Java during the last 4 years 2017-2020, tends to increase and in the last year the purchasing power of the people of West Java has decreased due to the influence of the COVID-19 pandemic. The purpose of this study is to analyze the effect of inflation and consumption credit on people's purchasing power in the province of West Java. The results of the study show that inflation and the distribution of banking consumption credit simultaneously have a significant effect on people's purchasing power. Partially, inflation has a negative and significant effect on people's purchasing power, while banking consumption credit has a positive and significant impact on people's purchasing power, economic growth, income per capita and other unknown variables.

Consumer credit usage in Canada during the coronavirus pandemic.

The recent COVID‐19 pandemic has devastated economies worldwide. Using detailed, monthly data from a major consumer credit reporting agency in Canada, we have examined individuals’ use of credit cards and home‐equity lines of credit (HELOCs). We found a dramatic leftward shift in the distribution of credit card and HELOC outstanding balances, providing evidence for a widespread reduction in credit usage. Our findings suggest that, during the COVID‐19 recession, Canadian consumers were able to meet their financial needs without increasing their debt burdens. These results complement other findings concerning a decline in consumer spending and the results of government assistance programs, and imply that the economic consequences of this pandemic are very different from those in other recessions.

Consumer Credit Law and the Protection of Low-income Consumers in the United Kingdom

Since the mid -1980’s consumer credit has grown rapidly in most European countries. Consumer credit is of great importance in our lifestyle model of consumption. Consumer credit plays an important role in lifecycle budgeting, balancing saving, spending and income smoothing”. Consumer credit furthermore “permits the accumulation of capital assets”. However, one cannot deny that whether consumer credit is used for the accumulation of capital assets (such as housing), depreciating assets or expensive external services, low - income consumers are nevertheless the most vulnerable against the use of credit. This is because nearly two-thirds of low-income households have no savings and of those who do save, have insufficient money that precludes the need for borrowing Keywords: Consumer Credit, Low-Income, Protection, United Kingdom DOI: 10.7176/JLPG/118-03 Publication date: February 28 th 2022