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Unsecured Credit Supply, Credit Cycles, and Regulation

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  • Song Han
  • Benjamin J. Keys
  • Geng Li

Abstract

This paper explores the dynamics of unsecured credit supply over the recent credit cycle and around the passage of the CARD Act. We examine a unique data set of over 200,000 credit card mail solicitations to a representative sample of households and introduce credit card offers as a direct, informative measure of supply of such credit. Contrasting personal credit card offer dynamics before and after the passage of the CARD Act with those of personal loans, auto loans, and corporate credit cards, we find that lenders reduced credit supply of personal credit cards to nonprime borrowers in response to the CARD Act. Our analysis highlights the importance of separately examining supply and demand responses to assess the unintended consequences of regulation. Received January 30, 2016; editorial decision August 9, 2017 by Editor Philip Strahan.

Suggested Citation

  • Song Han & Benjamin J. Keys & Geng Li, 2018. "Unsecured Credit Supply, Credit Cycles, and Regulation," The Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 1184-1217.
    • Handle: RePEc:oup:rfinst:v:31:y:2018:i:3:p:1184-1217.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhx114
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    Citations

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    Cited by:

    1. Nathan Blascak & Anna Tranfaglia, 2021. "Decomposing Gender Differences in Bankcard Credit Limits," Working Papers 21-35, Federal Reserve Bank of Philadelphia.
    2. Lei Lu & Jianxing Wei & Weixing Wu & Yi Zhou, 2023. "Pricing strategies in BigTech lending: Evidence from China," Financial Management, Financial Management Association International, vol. 52(2), pages 333-374, June.
    3. Suting Hong & Robert M. Hunt & Konstantinos Serfes, 2023. "Dynamic Pricing of Credit Cards and the Effects of Regulation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 64(1), pages 81-131, August.
    4. Jessica N. Flagg & Simona Hannon, 2023. "An Overview of Personal Loans in the U.S," Finance and Economics Discussion Series 2023-057, Board of Governors of the Federal Reserve System (U.S.).
    5. Ryan M. Goodstein & Alicia Lloro & Sherrie L.W. Rhine & Jeffrey M. Weinstein, 2021. "What accounts for racial and ethnic differences in credit use?," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(2), pages 389-416, June.
    6. Maude Pugliese & Céline Le Bourdais & Shelley Clark, 2021. "Credit Card Debt and the Provision of Financial Support to Kin in the US," Journal of Family and Economic Issues, Springer, vol. 42(4), pages 616-632, December.
    7. Tal Gross & Raymond Kluender & Feng Liu & Matthew J. Notowidigdo & Jialan Wang, 2020. "The Economic Consequences of Bankruptcy Reform," Working Papers 2020-164, Becker Friedman Institute for Research In Economics.
    8. Manolis Galenianos & Alessandro Gavazza, 2022. "Regulatory Interventions in Consumer Financial Markets: The Case of Credit Cards," Journal of the European Economic Association, European Economic Association, vol. 20(5), pages 1897-1932.
    9. Yiwei Dou & Geng Li & Joshua Ronen, 2019. "Does Price Regulation Affect Competition? Evidence from Credit Card Solicitations," Finance and Economics Discussion Series 2019-018, Board of Governors of the Federal Reserve System (U.S.).
    10. Erik Dolson & Julapa Jagtiani, 2021. "Which Lenders Are More Likely to Reach Out to Underserved Consumers: Banks versus Fintechs versus Other Nonbanks?," Working Papers 21-17, Federal Reserve Bank of Philadelphia.
    11. Colin Campbell & Maude Pugliese, 2022. "Credit Cards and the Receipt of Financial Assistance from Friends and Family," Journal of Family and Economic Issues, Springer, vol. 43(1), pages 153-168, March.
    12. Laura Marcela Capera Romero, 2021. "The Effects of Usury Ceilings on Consumers Welfare: Evidence from the Microcredit Market in Colombia," Tinbergen Institute Discussion Papers 21-055/IV, Tinbergen Institute.
    13. Gregory E. Elliehausen & Simona Hannon, 2023. "FinTech and Banks: Strategic Partnerships That Circumvent State Usury Laws," Finance and Economics Discussion Series 2023-056, Board of Governors of the Federal Reserve System (U.S.).
    14. Hannon, Simona, 2024. "Essays on consumer finance," Other publications TiSEM 4958b451-b30a-4957-9763-1, Tilburg University, School of Economics and Management.
    15. Böhnke, Victoria & Ongena, Steven & Paraschiv, Florentina & Reite, Endre J., 2024. "Back to the roots of internal credit risk models: Does risk explain why banks' risk-weighted asset levels converge over time?," Discussion Papers 02/2024, Deutsche Bundesbank.
    16. Keys, Benjamin J. & Wang, Jialan, 2019. "Minimum payments and debt paydown in consumer credit cards," Journal of Financial Economics, Elsevier, vol. 131(3), pages 528-548.
    17. Sarah Miller & Cindy K. Soo, 2020. "Does Increasing Access to Formal Credit Reduce Payday Borrowing?," NBER Working Papers 27783, National Bureau of Economic Research, Inc.
    18. Yiwei Dou1 & Julapa Jagtiani & Joshua Ronen & Ramain Quinn Maingi, 2022. "The Credit Card Act and Consumer Debt Structure," Journal of Law, Finance, and Accounting, now publishers, vol. 7(1), pages 91-126, April.

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