The Real Effects of Financial Technology: Marketplace Lending and Personal Bankruptcy

62 Pages Posted: 26 Jul 2018 Last revised: 24 Mar 2020

See all articles by Piotr Danisewicz

Piotr Danisewicz

University of Bristol

Ilaf Elard

New York University Shanghai

Date Written: July 5, 2018

Abstract

We examine how financial technology affects household hardship in terms of personal bankruptcy. We exploit an exogenous source of variation in marketplace lending, a court verdict rendering above-usury loans issued by banks to Connecticut and New York residents null and void if the loans are sold outright to non-banks. We document a persistent rise in personal bankruptcies following the verdict and a decline in marketplace lending, particularly among low-income households. Marketplace loan defaults and other consumer credit by banks and finance companies remain unaffected, suggesting that increases in personal bankruptcy arise principally from reversing access to new lending technology.

Keywords: credit supply, marketplace lending, alternative finance, financial technology, bankruptcy

JEL Classification: D14, G21, G23

Suggested Citation

Danisewicz, Piotr and Elard, Ilaf, The Real Effects of Financial Technology: Marketplace Lending and Personal Bankruptcy (July 5, 2018). Available at SSRN: https://ssrn.com/abstract=3208908 or http://dx.doi.org/10.2139/ssrn.3208908

Piotr Danisewicz (Contact Author)

University of Bristol ( email )

School of Economics, Finance and Management
The Priory Road Complex
Bristol, BS8 1TU
United Kingdom

Ilaf Elard

New York University Shanghai ( email )

1555 Century Avenue
Pudong New District
Shanghai, 200120
China

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