Consumer Credit Regulation

Lander, David

doi:10.1007/978-3-319-28887-1_25

Cited by 4 publications

(3 citation statements)

References 16 publications

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“…Failures in the subprime mortgage market in 2008 caused credit markets to tighten and triggered the most severe economic crisis since the Great Depression. Additionally, the economic well-being of many families declined alongside the deregulation of credit markets (Dynan, 2009;Lander, 2016). However, a comprehensive study that includes all types of loans in the context of consumer economic well-being is lacking in literature.…”

Section: Introductionmentioning

confidence: 99%

Debt types and burdens by family structures

Xiao

Yao

2020

IJBM

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PurposeThe purpose of this study was to examine family structure differences in debt types and burdens of American families.Design/methodology/approachData was from the 2016 Survey of Consumer Finances. Eight types of family structures, five specific debts, and two debt burden indicators are examined with multivariate logistic regressions.FindingsAfter controlling for several socioeconomic variables, multivariate logistic regression results show that married with children families are more likely than five other family types to have any debt. In terms of specific debt, married with children families are more likely than six other types of families to have mortgages, four other types to have credit card loans, five other types to have to vehicle loans, three other types to have education loans, and one other type to have purchase loans. Married with children families are more likely than three other types of families (childless married couples, single males, and single females) to be late in debt payment for 60 or more days.Research limitations/implicationsThe data is limited to one-year cross-sectional data. To gain more insights on this topic, panel data could be used.Practical implicationsThe findings can be used for financial service professionals to identify loan demand and risk associated with various family structures and develop effective marketing strategies to serve these clients.Social implicationsThe findings are informative for public policymakers to develop family friendly economic policies and for consumer educators who help consumers make effective financial decisions when borrowing various types of loans.Originality/valueFirst, this study uses an innovative definition of family structure that counts several nontraditional family structures. Second, this study examines family structure differences in holdings of five specific debts together.

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Section: Introductionmentioning

confidence: 99%

Debt types and burdens by family structures

Xiao

Yao

2020

IJBM

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“…Finance companies seem more intent on maximizing the profit a consumer brings than minimizing the risk of defaulting (Thomas, 2000), and customers who pay late generate the most profit as long as lending is profitable (Lander, 2016). Lenders are therefore unlikely to curb their money-lending business unless it is outlawed or becomes unprofitable.…”

Section: Credit Scoring Creditworthiness and Responsible Lendingmentioning

confidence: 99%

An Analysis of Finnish Debtors Who Defaulted in 2014–2016 Because of Unsecured Credit Products

Majamaa

Lehtinen

2022

J Consum Policy

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Consumer credit has become an important element of the economy despite the negative effects: Over-indebtedness has wide-ranging repercussions affecting consumers and society as a whole. We analysed the debt judgements (N = 4,095) of Finnish district courts from 2014 to 2016, as well as administrative data on debtors. Our focus was on the position of consumers on the credit market and their consumption-related problem debts, namely instant loans, extensive consumer credit, and credit-card as well as distance-selling indebtedness. Regarding the four credit products, first we considered the average amount of outstanding debt and then we looked at the sociodemographic and socioeconomic characteristics of the debtors. The results revealed that the average outstanding debt (€) varied according to the credit product and that the highest average amount originated from extensive consumer credit. Instant loans and distance-selling indebtedness caused debt problems especially among low-income young adults, adverse selection seemingly being one factor behind instant-loan-related debts. Extensive consumer credit and credit-card indebtedness were behind debt judgements against older consumers with a good socioeconomic position and numerous previous loans. This is a moral-hazard situation whereby borrowers may have more information about their total amounts of debt than the lenders. We suggest that, in many cases, debt problems reflect an abundant supply of consumer credit, which seems to foster asymmetric information, the consumer’s position and competence to act in the credit market, as well as various overall risk factors. The findings highlight the need to strengthen consumers’ financial skills and for loan products that meet the needs of low-credit-rated consumers. Moreover, lenders should act responsibly in the current credit market.

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“…Research shows that if done correctly, for a family with a $100,000 and a $500,000 mortgage, the optimal refinancing interest rate difference should be 193 and 118 base points, respectively (Agarwal et al., 2013). In addition, financial service practitioners should also help consumers avoid undesirable refinancing behaviour such as “cash refinancing” that caused the 2007–09 financial crisis (Lander, 2016). Consumer educators should rather provide adequate information for consumers to make desirable refinancing decisions based on their real needs in financial education programmes.…”

Section: Policy Implicationsmentioning

confidence: 99%

Consumer financial literacy and the efficiency of mortgage‐related decisions: New evidence from the Panel Study of Income dynamics

Białowolski

Cwynar

Xiao

et al. 2021

Int J Consumer Studies

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This study evaluated the link between financial literacy and household mortgage decisions. To this end, the longitudinal data set for the U.S. population from the Panel Study of Income Dynamics (PSID) was used. Evidence for links between financial literacy levels and (1) mortgage uptake, (2) mortgage interest rates and (3) mortgage refinancing decisions were examined using the two waves (2015 and 2017) of PSID data, combined with the 2016 PSID supplementary questionnaire examining the measured financial literacy of household members. Our results revealed a positive link between financial literacy and mortgage possession and, additionally, between financial literacy and the subsequent decision to take out a mortgage. Moreover, higher financial literacy scores were associated with lower mortgage interests and a greater likelihood of mortgage refinancing. On average, a household that refinanced its mortgage was able to reduce its interest rate by almost 0.7 percentage points, providing evidence of the positive role of financial literacy in securing better mortgage terms.

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Consumer Credit Regulation

Cited by 4 publications

References 16 publications

Debt types and burdens by family structures

Debt types and burdens by family structures

An Analysis of Finnish Debtors Who Defaulted in 2014–2016 Because of Unsecured Credit Products

Consumer financial literacy and the efficiency of mortgage‐related decisions: New evidence from the Panel Study of Income dynamics

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