Access to Credit and Financial Health: Evaluating the Impact of Debt Collection

39 Pages Posted: 1 Jun 2017

See all articles by Julia Fonseca

Julia Fonseca

Princeton University

Katherine Strair

Federal Reserve Banks - Federal Reserve Bank of New York

Basit Zafar

Arizona State University

Date Written: 2017-05-01

Abstract

Despite the prevalence of debt collection and the intense regulatory activity surrounding this industry, little is known about how these practices impact consumers. This paper conducts an empirical analysis of the effect of debt collection on consumer credit and on indicators of financial health, employing individual credit record data and a difference-in-differences research design that compares outcomes for consumers in states that increased the restrictiveness of legislation with those for consumers in the remaining states. We find consistent evidence that restricting collection activities leads to a decrease in access to credit and a deterioration in indicators of financial health. Moreover, our estimated treatment varies considerably with the borrower's age and baseline credit score, with effects concentrated primarily among borrowers with the lowest credit scores.

Keywords: debt collection, financial well-being

JEL Classification: D12, D18, G18, K30

Suggested Citation

Fonseca, Julia and Strair, Katherine and Zafar, Basit, Access to Credit and Financial Health: Evaluating the Impact of Debt Collection (2017-05-01). Available at SSRN: https://ssrn.com/abstract=2977858

Julia Fonseca (Contact Author)

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Katherine Strair

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

Basit Zafar

Arizona State University ( email )

WP Carey School of Business, ASU
Tempe, AZ 85287
United States
9179326564 (Phone)

HOME PAGE: http://https://sites.google.com/site/basitakzafar/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
151
Abstract Views
852
rank
246,215
PlumX Metrics