Beyond Race and Gender: Financial Access to Low and Moderate Income Households

21 Pages Posted: 11 Apr 2011

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Chau Do

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Date Written: April 9, 2011

Abstract

Checking accounts with an overdraft protection line of credit can be seen as the first steps in accessing credit for some households, specifically for Low- to Moderate-Income (LMI) borrowers. In this paper, we assess a lender’s decision to grant LMI consumers an overdraft protection line of credit for their checking account, and the extent to which LMI borrowers bounce their checks once approved for an overdraft protection. Based on a sample of over 19,000 households, we find that banks are more likely to deny credit to their current LMI customers, controlling for an individual's income and credit risk characteristics. Low and moderate income customers also receive about $1100-$1500 lower overdraft line of credit. However, based on their ex post performance, they are not significantly more likely to bounce a check than higher income households.

Keywords: Household Finance, Banking, LMI Borrowers, Checking Accounts, Overdraft

JEL Classification: G2, D1, D8

Suggested Citation

Agarwal, Sumit and Chomsisengphet, Souphala and Do, Chau, Beyond Race and Gender: Financial Access to Low and Moderate Income Households (April 9, 2011). Available at SSRN: https://ssrn.com/abstract=1806344 or http://dx.doi.org/10.2139/ssrn.1806344

Sumit Agarwal (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Chau Do

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

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