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Information and consumer credit in Central and Eastern Europe

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  • Rona-Tas, Akos
  • Guseva, Alya

Abstract

We present a critique of Behavioral Economics, the dominant approach to reforming the regulation of retail credit, and propose a new approach to managing uncertainty in consumer lending. This new approach draws on a different model of decision-making, Distributed Cognition, to improve contract origination, and it takes inspiration from the Legal Theory of Finance with respect to contract enforcement. We develop a set of stylized arguments about information-related problems and their possible solutions in Central and East European markets, discussing separately measures to protect lenders, such as requiring collateral, collection, screening and data sharing, and those to protect consumers, including disclosure, data privacy and regulation of automated individual decisions. Then we move to enforcement and using the empirical case of the Hungarian foreign exchange mortgage crisis we illustrate the importance of elasticity of law.

Suggested Citation

  • Rona-Tas, Akos & Guseva, Alya, 2013. "Information and consumer credit in Central and Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 420-435.
    • Handle: RePEc:eee:jcecon:v:41:y:2013:i:2:p:420-435
    DOI: 10.1016/j.jce.2013.03.012
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    References listed on IDEAS

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    Cited by:

    1. Bagayev, Igor & Najman, Boris, 2014. "Money to fill the gap? Local financial development and energy intensity in Europe and Central Asia," MPRA Paper 55193, University Library of Munich, Germany.
    2. Pistor Katharina, 2021. "Theorizing Beyond “The Code of Capital”: A Reply," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 11(1), pages 65-80, March.
    3. Pistor, Katharina, 2013. "Law in Finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 311-314.
    4. Pistor, Katharina, 2013. "A legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 315-330.

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    More about this item

    Keywords

    Behavioral economics; Distributed cognition; Consumer credit; Mortgage; Data sharing; Data privacy; Automated individual decision; Legal theory of finance; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K2 - Law and Economics - - Regulation and Business Law

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