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http://ssrn.com/abstract=1335873
 
 

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Bouncing Out of the Banking System: An Empirical Analysis of Involuntary Bank Account Closures


Dennis Campbell


Harvard Business School

Francisco de Asis Martinez-Jerez


University of Notre Dame - Department of Accountancy

Peter Tufano


University of Oxford - Said Business School; National Bureau of Economic Research (NBER)

December 3, 2008


Abstract:     
Banks closed over 30 million debit/checking consumer accounts involuntarily in 2001-2005 for excessive overdrafts, with these former bank customers having limited or no subsequent access to the formal banking system. Using a new county-level database, we analyze the determinants of these involuntary account closures, focusing on explanations relating to household economics and financial decision making ability, social capital, bank policies, and credit access through payday lending. Involuntary closures are more frequent in counties with a larger fraction of single mothers, lower education levels, lower wealth, and higher rates of unemployment. Social capital also matters, with closures higher in counties with higher rates of property crime and lower rates of electoral participation. Bank policies relate to closures, with more closures in counties with more competitive banking markets and more multi-market banks. Finally, using national data and a natural experiment, we find that access to payday lending leads to higher rates of involuntary account closure.

Number of Pages in PDF File: 44

Keywords: Consumer Finance, Payday Lenders, Account Closures, Overdraft, Unbanked, Commercial Banking

JEL Classification: G21, D12, E21, G28, D18, E65

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Date posted: January 31, 2009 ; Last revised: October 2, 2009

Suggested Citation

Campbell, Dennis and Martinez-Jerez, Francisco de Asis and Tufano, Peter, Bouncing Out of the Banking System: An Empirical Analysis of Involuntary Bank Account Closures (December 3, 2008). Available at SSRN: http://ssrn.com/abstract=1335873 or http://dx.doi.org/10.2139/ssrn.1335873

Contact Information

Dennis Campbell
Harvard Business School ( email )
Soldiers Field
Boston, MA 02163
United States
Francisco de Asis Martinez-Jerez
University of Notre Dame - Department of Accountancy ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
Peter Tufano (Contact Author)
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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