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Credit counseling: a substitute for consumer financial literacy?

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  • DISNEY, RICHARD
  • GATHERGOOD, JOHN
  • WEBER, JÖRG

Abstract

Is financial literacy a substitute or complement for financial advice? We analyze the decision by consumers to seek financial advice in the form of credit counseling. Credit counseling is an important component of the consumer credit sector for consumers facing debt problems. Our analysis accounts for the endogeneity of an individual's financial situation to financial literacy, and the endogeneity of financial literacy to exposure to credit counseling. Results show counseling substitutes for financial literacy. Individuals with better literacy are 60% less likely to use credit counseling. These results suggest that credit counseling provides a safety net for poor financial literacy.

Suggested Citation

  • Disney, Richard & Gathergood, John & Weber, Jã–Rg, 2015. "Credit counseling: a substitute for consumer financial literacy?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 466-491, October.
  • Handle: RePEc:cup:jpenef:v:14:y:2015:i:04:p:466-491_00
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    Cited by:

    1. Marotta, Giuseppe, 2020. "Behind the success of dominated personal pension plans: sales force and financial literacy factors," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(4), pages 532-547, October.
    2. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    3. Fang Zhao & Jie Sun & Raj Devasagayam & Gary Clendenen, 2018. "Effects of culture and financial literacy among Chinese-Americans on participating in financial services," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 23(1), pages 62-75, March.

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