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Credit supply to personal bankruptcy filers: evidence from credit card mailings

  • Song Han
  • Benjamin J. Keys
  • Geng Li
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Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, we directly explore the supply of unsecured credit to consumers with the most conspicuous default risk--those with a bankruptcy history. On average, over one-fifth of personal bankruptcy filers receive at least one offer in a given month, with the likelihood being even higher for those who filed for bankruptcy within the previous two years. However, offers to bankruptcy filers carry substantially less favorable terms than those to comparable consumers without a bankruptcy history, with higher interest rates, lower credit limits, a greater likelihood of having an annual fee, and a smaller likelihood of having rewards or promotions. In addition, our analysis of credit terms typically disclosed only in the fine print suggests that offers to filers tend to include more "hidden" costs.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2011-29.

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Date of creation: 2011
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Handle: RePEc:fip:fedgfe:2011-29
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  1. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
  2. Kenneth P. Brevoort, 2009. "Credit card redlining revisited," Finance and Economics Discussion Series 2009-39, Board of Governors of the Federal Reserve System (U.S.).
  3. Igor Livshits & James MacGee & Mich�le Tertilt, 2007. "Consumer Bankruptcy: A Fresh Start," American Economic Review, American Economic Association, vol. 97(1), pages 402-418, March.
  4. Ethan Cohen-Cole & Burcu Duygan-Bump & Judit Montoriol-Garriga, 2009. "Forgive and forget: who gets credit after bankruptcy and why?," Risk and Policy Analysis Unit Working Paper QAU09-2, Federal Reserve Bank of Boston.
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  8. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2002. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Centro de Alti­simos Estudios Ri­os Pe©rez(CAERP) 2, Centro de Altisimos Estudios Rios Perez (CAERP).
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  12. Kathleen W. Johnson & Geng Li, 2010. "The Debt-Payment-to-Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1373-1390, October.
  13. Song Han & Geng Li, 2009. "Household borrowing after personal bankruptcy," Finance and Economics Discussion Series 2009-17, Board of Governors of the Federal Reserve System (U.S.).
  14. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, June.
  15. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.
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  18. Ethan Cohen-Cole, 2008. "Credit card redlining," Risk and Policy Analysis Unit Working Paper QAU08-1, Federal Reserve Bank of Boston.
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