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Bank misconduct and online lending

Author

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  • Bertsch, Christoph
  • Hull, Isaiah
  • Qi, Yingjie
  • Zhang, Xin

Abstract

We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

Suggested Citation

  • Bertsch, Christoph & Hull, Isaiah & Qi, Yingjie & Zhang, Xin, 2020. "Bank misconduct and online lending," Journal of Banking & Finance, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:jbfina:v:116:y:2020:i:c:s0378426620300893
    DOI: 10.1016/j.jbankfin.2020.105822
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    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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