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Meeting the demand for debt relief

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  • Stephanie M. Wilshusen
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    Abstract

    Each year, millions of financially distressed consumers in the U.S. face a difficult choice among the debt relief options available to them. This paper describes the options available to borrowers who seek assistance in managing their debts and discusses the information and incentive problems associated with these options. It also reviews the trends that contributed to the breakdown of the repayment framework and the responses to these trends. Among the responses is a reconsideration of the regulatory structure of the debt relief industry. The paper concludes with a discussion of the importance for debt relief providers and policymakers to evaluate the efficacy of workout options and to develop a deeper understanding of how consumers make decisions about incurring and repaying debt.

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    File URL: http://www.philadelphiafed.org/payment-cards-center/publications/discussion-papers/2011/D-2011-Demand-for-Debt-Relief.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Philadelphia in its series Payment Cards Center Discussion Paper with number 11-04.

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    Date of creation: 2011
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    Handle: RePEc:fip:fedpdp:11-04

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    Related research

    Keywords: Debt relief ; Consumer credit;

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    1. Hellwig, Martin F, 1977. "A Model of Borrowing and Lending with Bankruptcy," Econometrica, Econometric Society, vol. 45(8), pages 1879-1906, November.
    2. Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 217-51, February.
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    9. John M. Barron & Michael E. Staten, 2011. "Is technology-enhanced credit counseling as effective as in-person delivery?," Working Papers 11-11, Federal Reserve Bank of Philadelphia.
    10. Robert M. Hunt, 2005. "Whither consumer credit counseling?," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 9-20.
    11. Victor Stango & Jonathan Zinman, 2011. "Limited and varying consumer attention: evidence from shocks to the salience of bank overdraft fees," Working Papers 11-17, Federal Reserve Bank of Philadelphia.
    12. Bolton, Patrick, 1990. "Renegotiation and the dynamics of contract design," European Economic Review, Elsevier, vol. 34(2-3), pages 303-310, May.
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