Credit cards,new technology and consumer debt*

There has been a rapid expansion in consumer indebtedness in the U.K. The amount of consumer debt has doubled in real terms during the last 10 years. The majority of consumers are able to cope with their debt repayments, but there are a significant number of credit casualties, often burdened with multiple debts. Credit cards have played a significant but not overwhelming part in this increase in debt. There are now 62 bank credit cards for every 100 adults in the U.K., a much higher incidence than in any other European country. Credit cards have been aggressively marketed and sold, and it is possible that they will now move downmarket, to consumers in lower income groups. This possibility highlights the need for a major consumer education campaign on the cost of credit. U.K. consumers' knowledge of and ability to compare credit interest rates is poor, especially among lower income consumers who are most at risk.     

Consumer debt in Australia: why banks will not turn their backs on profit

Five years into the 21st century and consumer debt levels in Australia are still escalating. Simultaneously, there is concern that an increasing number of consumers may be unable to meet their future financial commitments and also mounting alarm at the relative ease with which the majority of consumers can access additional credit facilities. At the same time, credit providers are avidly seeking greater profits by enticing consumers to borrow more and more. Against this background, the issue of corporate social responsibility (CSR) in the Australian consumer credit industry is discussed. The application of strategic stakeholder management theory to the activities of a specific class of lender – banks – is then discussed. The aim is to better understand why the contemporary demands of CSR will not lead banks to undertake a more vigilant approach to consumer lending advocated by consumer groups who, witnessing the impact of the growing level of consumer indebtedness on a number of consumers, are calling for more responsible lending practices. The opportunity to contribute to debate aimed at alleviating the risk of growing consumer indebtedness is highlighted. The paper concludes with an acknowledgement that, without intervention, factors such as competition in the free market for consumer credit, the demands of shareholders for profits, and consumers’ own folly in demanding immediate gratification and readily accepting additional credit as a means of financing their consumption, ensure that consumer debt levels will continue to rise.     

Credit Indebtedness and the UK Retail Trade

Prior to the end of 1989, most sectors of the UK retail trade had for some time been benefiting from a boom in sales. Many reasons may be forwarded to explain the high level of sales that had devéloped. This paper focuses attention on the greatly increased levels of consumer credit indebtedness associated with high retail sales. Examination is made of the possibility that a fundamental change in UK patterns of saving and spending has taken place. It is suggested that the retail trade must pay attention to the implications of rising credit and of any restrictions on consumer credit that may be introduced at some future date.     

Idiosyncratic use of credit facilities by consumers in an emerging economy

A worldwide increase in household debt since the turn of the century has created considerable concern about the indebtedness of households, especially those in emerging economies that have been hit particularly hard by the global economic slump. In this study, the credit consumption of consumers in Swaziland (N = 264) was investigated by means of a survey that aimed to identify and describe factors that encouraged consumers' use of credit, the influence of credit on their buying behaviour when choosing major household appliances or furniture as well as consumers' knowledge of the conditions of credit facilities that were available for their use in retail. Findings revealed that consumers unequivocally appreciate the convenience that is associated with credit, specifically to cope with unexpected purchases, to benefit from special offers and opportunity to afford expensive goods. These advantages apparently negate the negative consequences such as high interest rates and strain on household budgets. Mean scores that were obtained in the knowledge test that only reflected upon credit agreements that respondents have actually entered into in the past, confirmed their ignorance pertaining to their contractual obligations and their consequent vulnerability. Consumers' age and gender seem to have noteworthy consequences for efforts to enhance informed consumer decision‐making. Younger females were significantly better informed that their older counterpart while the reverse was true for males, although differences were not significant. The significant inverse relationship between income and the LS‐means for the credit knowledge test differ from findings in developed countries and provide valuable opportunity for further investigation.     

Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms

This paper investigates how the choice between single or multiple banking relationships affects credit availability for a complete panel of small and medium-sized Spanish firms. The results seem to indicate the existence of rationing, since a substitution relation has been found between trade and bank credit. We also analyse the relationship between the level of indebtedness and the interest rate for each group of firms. The results show that those SMEs that work with fewer financial intermediaries obtain fewer funds for the same increase in the interest rate, which indicates that these companies have more financial restraints.     

The rise of dollar credit in emerging market economies and US monetary policy

This paper examines the hypothesis that the boom in dollar credit in emerging market economies (EMEs) is associated with an excessively low interest rate in the US. For this purpose, we use a multivariate correlated unobserved component model that allows for correlation between shocks to dollar credit, cross‐border interest rate gaps—measured as the difference between emerging market interest rate and the US interest rate, and dollar index both in the short run and in the long run. In addition, it also provides us a quantitative estimate of the permanent and transitory movements in dollar credit in EMEs, interest rate gaps and dollar index. The results from this model do suggest that a temporary increase in interest rate gaps and decline in the dollar index are associated with a temporary increase in the dollar credit in EMEs with a very high degree of correlation. The estimate of the cyclical component of the dollar credit in EMEs from our model captures the recent boom and bust in this market and compares favourably to alternative trend–cycle decomposition methods.     

Buying behavior,social support and credit card indebtedness of college students

This research examines three factors that are associated with college students' credit card indebtedness. Using survey data, we find that college students' buying patterns and social networks affect their credit card indebtedness. Specifically, students with a tendency towards compulsive buying are more likely and those with greater social support are less likely to hold credit card debts. Depth interview data further illustrate the contexts and causes of overusing credit cards as well as solutions for their debt problem. This research sheds light on reasons why college students fall into credit card debt and suggests strategies for helping them use credit cards wisely.     

Die Transmission über den Zinskanal: von der Geldpolitik zur Kreditnachfrage

Through more favourable funding costs for commercial banks, the central bank can send expansionary monetary stimuli into the real economy to boost the demand for credit. In this regard, one of the most important channels for the transmission of monetary policy is the interest rate channel. This contribution analyses the effectiveness of the interest rate channel in the eurozone. It comes to the conclusion that the transmission of the expansive monetary stimulus into the banking sector works well, but that the transmission of the stimulus to the real economy is partly inhibited. The main factors that dampen credit demand are higher real interest rates as well as low growth and higher indebtedness, especially in the eurozone’s peripheral countries.     

Consumer credit and monetary policy in Malaysia

What is the impact of monetary policy on the Malaysian consumer? The study addresses this issue by empirically investigating the consequences of interest rate shocks on consumer credit in Malaysia. The study relies on the impulse response functions and the variance decomposition analysis based on the structural Vector Auto‐regression methodology. Apart from analysing the responses of aggregate consumer loans (ACL) to interest rate changes, further disaggregation is made in efforts to arrive at more detailed findings. In particular, the ACL data are categorized into loans for purchase of residential property, loans for personal uses, loans for credit cards, loans for purchase of consumer durables, loans for purchase of passenger cars and loans for purchase of securities. Through this disaggregation, the study shows the relative sensitivity of the various types of consumer loans to interest rate shocks.     

Assessing the Effectiveness of Financial Coaching: Evidence from the Boston Youth Credit Building Initiative

Since the 2008 financial crisis, there has been renewed interest in providing financial education to improve consumer financial decision making, especially among youth. Using a randomized controlled trial, we estimate the causal effects of a financial coaching program for young adults from linked individual‐level administrative credit reports and self‐reported survey responses. Within six months, the treatment group was 10 percentage points more likely to have access to credit compared to the control group. After 18 months, the average credit score was 26 points higher for the treatment group versus the control group, raising the likelihood of achieving a “good” credit rating by 8 percentage points. Consequently, the treatment group was less likely to rely on alternative financial services and paid lower interest rates on car loans. These impacts are largely driven by improvements in self‐efficacy, offering important insights for policymakers seeking to incorporate financial education into youth workforce development programs.     

Credit Union Determinant Attributes as Discriminating Factors in the Consumer's Financial Institution Choice Process

Deregulation has created a very competitive financial services industry. Of particular concern to the dominant banking sector has been the growth in the quantity and quality of credit union members. In an effort to understand thrs trend, this paper seeks to identify which determinant attributes in the financial institutional ,choice process significantly discriminates bank patrons from credit union members. Factor scores generated by a Principal-axis factor analysis of eighteen determinant attributes are used as input into a Multiple Discriminant Analysis. Results indicate that three factors significantly discriminate bank patrons from credit union members. Implications for credit union marketing managers is discussed.     

Monetary Union Viability: A Criterion Proposal

We propose a model that represents the dynamic behaviour of a monetary union comprising two countries whose natural interest rates are initially unequal. This initial disparity and the subsequent application of a common monetary policy generate different national inflation rates and lead to losses of competitiveness, foreign deficits, and the indebtedness of one country with respect to the other. We propose as a viability criterion for the modelled monetary union a combination of non‐explosive foreign debt and the ability of the central bank to neutralize the contracting effects of taking on additional debt to avoid falling into a liquidity trap.     

Credit Union Image Variables

Deregulation has created a very competitive financial services industry. Of particular concern to the dominant banking sector has been the growth in the number of credit union members and their economic potential. In an effort to understand this trend, this paper seeks to ~dentify which image factors significantly dis- criminate bank patrons from credit union members. Factor scores generated by a Principal-axis factor analysis of twenty image vari- ables are used as input into a Multiple Discrirninafit Analysis. Results indicate that three factors significantly discriminate bank pa- trons from credit union members.     

Impact of Consumer Installment Debt on Food Expenditures

Trends in consumer installment credit over the period 1980 to 1989 are discussed; as well, a two-equation recursive model is developed to identify and assess the impact of installment credit on food expenditures. The first equation concerns factors affecting the ratio of consumer installment credit to personal disposable income, namely habit persistence, expected income, the prime interest rate, the unemployment rate, and the percentage of the population aged 25 to 44. The second equation focuses on factors affecting real per capita food expenditures, namely the real price of food, real per capita personal disposable income, seasonality, and a polynomial distributed lag of the measure of the ratio of consumer installment credit to personal disposable income from the first equation. The ratio of installment credit to personal disposable income has a positive effect on food expenditures; over the long run a one percent change in this ratio leads to a 0.15 percent change in real per capita food expenditures. On average, it takes just over six months for a change in this ratio to be transferred to food expenditures.     

What’s in a Score? Differences in Consumers’ Credit Knowledge Using OLS and Quantile Regressions

Credit literacy depends, in part, on understanding credit reports and scores. The U.S. Government Accountability Office conducted a study in 2004 to assess consumers’ knowledge of credit reports, credit scores, and the dispute resolution process. This study uses the Government Accountability Office data and estimates a series of ordinary least squares and quantile regressions to identify specific subgroups of the population that could benefit from more targeted consumer policies and financial education. The findings from this research have important implications for consumer educators, financial professionals, and policy makers, especially with respect to national strategies designed to improve consumers’ financial well‐being.     

银行异质性、货币政策工具与银行信贷

通过对中国银行业2006-2010年84家银行的数据建立Panel Data模型,本文分析了货币供应量和银行间市场利率对不同类型银行信贷的影响。研究结果发现国有银行和股份制银行的信贷要显著地受到货币供应量的影响,而外资银行和城市商业银行的信贷要受到银行间市场利率的显著影响,农村商业银行没有显著地受到这些货币政策工具的影响。另外,货币政策工具对银行信贷的影响,也与不同类型银行的规模、资本充足性、盈利能力等方面的特征有关。因此,中央银行在运用不同的货币政策工具时,要综合考虑不同类型的银行对货币政策工具的反应。     

Grenzen gewerkschaftlicher Verbraucherpolitik Anmerkungen zu Tonners Beitrag

The limits of trade union consumer policy — Remarks on the preceding paper by Tonner. In this contribution, the author discusses the limits that are set for trade unions when entering the consumer policy arena. Three levels of varying intensity with respect to the engagement in consumer politics are distinguished. The trade union movement can act as (a) the occasional representative of consumer interests; (b) the chief representative of specific consumer groups; (c) the chief representative of the general consumer interest. Arguments are stated in support of the view that the aspiration of trade unions to represent the general consumer interest cannot, within a democratically, pluralistically ruled society, be legitimated. To guard the specific consumer interests of their membership is a perfectly legitimate task for trade unions. Because of the interpersonal conflicts that arise it is, however, not in the interest of either employees or consumers that trade unions act as chief consumer advocates even for these specific interests. There is reason to believe that all sides are best served if trade unions devote themselves primarily to the representation of employee interests and only occasionally concern themselves with consumer affairs.     

How federally insured reverse mortgages affect the credit outcomes of older adults

This study examines how the extraction of home equity through the federally insured Home Equity Conversion Mortgage (HECM) affects the credit outcomes of older adults. We use data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, supplemented with a unique credit panel data set of reverse mortgage borrowers. Using matched sample difference-in-differences with individual fixed effects, we estimate credit outcomes for older adults who borrowed through a HECM between 2008 and 2011, relative to older homeowners not borrowing from home equity. Our results indicate that the HECM is associated with a short-term reduction in revolving credit card debt, as well as a reduction in the probability of bankruptcy. We find some evidence of heterogeneous treatment effects, where older adults with higher levels of consumer debt prior to originating a HECM experience larger subsequent declines in debt, increases in credit score, and steeper reductions in bankruptcy rates.     

The Way into Bankruptcy: Market Anomie and Sacrifice Among Portuguese Consumers

Portugal ranks among the EU27 countries with higher levels of consumer indebtedness. Contrary to the trend observed in countries with similar indebtedness rates, Portugal has one of the lowest rates of consumer default. Previous studies (e.g., Frade et al. 2006) have identified three strategies that have contributed to keep levels of credit default low: reliance on savings, financial support from relatives and friends, and cuts in household expenses. These strategies have been widely used for the last decade and have been strained since the very beginning of the global financial crisis in 2007. We argue that these three strategies are near to collapse and consequently the levels of consumer default will rise steeply in the next years. The savings rate in Portugal has been declining over time, and the social networks are limited in their action due to the current crisis that affects everyone. In this article, we advance the hypothesis that sacrificing living standards is rooted on collective beliefs about the current economic crisis in Portugal and trust in political and market agents in line with the Theory of Market Anomie (Karstedt and Farrall 2006). The conclusions are based on macroeconomic statistics and on the results of a Web survey of 1244 Portuguese households, which focuses on attitudes towards the financial crisis, trust in political and economic institutions, and strategies to cope with the crisis. The results show that trust in financial companies (banks and insurance companies) and in the European Parliament promotes a sense of empowerment to contribute to the country economic restoration. This attitude induces citizens to avoid default by sacrificing living standards. But in the current austerity context, with low levels of trust in political institutions and detachment of the economy, consumers will be less prone to sacrifice. In this scenario, credit default and insolvency is expected to rise especially in those households most exposed to unemployment and to cuts in social benefits. This reality puts a huge and growing pressure on bankruptcy procedure, civil courts, and economic and social policies. Some adjustments should be made to the Portuguese Bankruptcy Code by facilitating and simplifying the bankruptcy regime in order to accommodate the increase in insolvency cases. But the improvement of the insolvency procedure will not resolve the situation of financial distress if the structural causes persist, such as unemployment and deterioration of salaries, and cuts in social benefits. A reform of the Bankruptcy Code facilitating and simplifying the bankruptcy regime should be coupled with measures that boost the economy and stimulate the labour market. Otherwise, Portuguese households will not have the resources necessary to benefit from the bankruptcy process and regain the control over their financial lives.     

消费品市场信用缺失的博弈分析

当前我国的整个市场特别是消费品市场存在着严重的信用缺失问题,对消费者的身心造成了极大的伤害.市场经济是信用经济,诚信原则是市场经济的灵魂和基础,重建消费品市场诚信环境,维护消费者权益是当务之急.信用是博弈的结果,从消费者与企业、企业与监管部门的博弈可以找到消费品市场信用缺失产生的原因.针对问题,可以对症下药,从根源上进行治理:建立高效的信息传输机制;完善法律体系,加大监督执法力度,建立高额赔偿金制度,让造假者付出高昂的成本;深化产权制度改革,使产权所有者具有进行重复博弈的动力,而着眼于长远利益.