Bank Misconduct and Online Lending
Sveriges Riksbank, Working Paper Series, November 2017
63 Pages Posted: 6 Jan 2021 Last revised: 8 Jan 2021
Date Written: November 1, 2017
We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.
Keywords: Financial development, Consumer loans, Bank misconduct, FinTech
JEL Classification: A13, G00, G21, K00
Suggested Citation: Suggested Citation