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Debt collection agencies and the supply of consumer credit

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  • Fedaseyeu, Viktar

Abstract

This paper finds that stricter laws regulating third-party debt collection reduce the number of third-party debt collectors, lower the recovery rates on delinquent credit card loans, and lead to a modest decrease in the openings of new revolving lines of credit. Further, stricter third-party debt collection laws are associated with fewer consumer lawsuits against third-party debt collectors but not with a reduction in the overall number of consumer complaints. Overall, stricter third-party debt collection laws appear to restrict access to new revolving credit but have an ambiguous effect on the nonpecuniary costs that the debt collection process imposes on borrowers.

Suggested Citation

  • Fedaseyeu, Viktar, 2020. "Debt collection agencies and the supply of consumer credit," Journal of Financial Economics, Elsevier, vol. 138(1), pages 193-221.
    • Handle: RePEc:eee:jfinec:v:138:y:2020:i:1:p:193-221
    DOI: 10.1016/j.jfineco.2020.05.002
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    Cited by:

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    2. LaVoice, Jessica & Vamossy, Domonkos F., 2024. "Racial disparities in debt collection," Journal of Banking & Finance, Elsevier, vol. 164(C).
    3. Romeo, Charles & Sandler, Ryan, 2021. "The effect of debt collection laws on access to credit," Journal of Public Economics, Elsevier, vol. 195(C).
    4. Distaso, Walter & Roccazzella, Francesco & Vrins, Frédéric, 2023. "Business cycle and realized losses in the consumer credit industry," LIDAM Discussion Papers LFIN 2023007, Université catholique de Louvain, Louvain Finance (LFIN).
    5. Pattison, Nathaniel, 2020. "Consumption smoothing and debtor protections," Journal of Public Economics, Elsevier, vol. 192(C).
    6. Xie, Jiaping & Wei, Lihong & Zhu, Weijun & Zhang, Weisi, 2021. "Platform supply chain pricing and financing: Who benefits from e-commerce consumer credit?," International Journal of Production Economics, Elsevier, vol. 242(C).

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    More about this item

    Keywords

    Household finance; Consumer credit; Creditor rights; Contract enforcement; Debt collection; Law and finance;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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