Household Finance and Public Policy
Paper Session
Sunday, Jan. 4, 2026 8:00 AM - 10:00 AM (EST)
- Chair: Benedict Guttman-Kenney, Rice University
Evaluating Credit Card Minimum Payment Restrictions
Abstract
We show how a government policy that restricts repayment choices substantially reduces credit card debt in the long-run, achieving its aim. The policy requires credit card minimum payments in Quebec to be at least 5% of outstanding balances for cards opened in August 2019 or later, and at least 2% for cards opened prior to August 2019, increasing by 50 basis points each year until August 2025. The rest of Canada is unaffected by the policy. We estimate the effects of the policy by applying a synthetic difference-in-differences methodology to comprehensive Canadian consumer credit reporting data. We study the dynamics of the policy, quantifying short-run and long-run effects. The policy causes a persistent increase in minimum payments of 34%, and has trade-offs. The policy reduces revolving debt by 19% in the long-run, with the effect growing over time. We also document, however, a 15% increase in borrowers transitioning into delinquency in the long-run. This increase does not appear to translate into higher default rates. Finally, the policy permanently reduces access to credit cards with fewer new cards opened and lower limits on existing cards.Don’t Lend So Close to Me: Payday Lending Spillover Effects on Formal Credit
Abstract
We examine the impact of a hyper-local payday loan supply shock on debtor uses of formal credit, by matching debtor-level credit bureau data with location of individual payday lender entry and exit in a difference-in-differences setting. We find that payday lender entry into a neighborhood worsens the financial stress of borrowers who do not have the ability to borrow against housing, while only increasing credit card balances for those who do. However, we find that payday borrowing helps borrowers who are credit constrained, as their credit card balances under stress increase and credit scores drop significantly when a payday lender exits their neighbourhood. We also exploit exogenous variation in provincial regulation of payday lenders and find that 7 day cool-down periods between payday loans increase credit card stress, which persists for two years after payday lender entry. Regulations that restrict borrowers to one loan per lender increase their credit card balances under stress and damage their credit scores, though these effects are relatively short-lived. These results suggest that there are important heterogeneities in how payday borrowing interacts with formal credit products.Non-Profits, Competition, and Risk Segmentation in Consumer Lending Markets
Abstract
We study how competition between non- and for-profit lenders shapes the equilibrium distribution of credit risk across lending institutions. Using auto loan data, we document direct competition between credit unions and banks for a significant fraction of the market. However, a degree of market segmentation by borrower risk still exists: credit unions serve observably and unobservably lower-risk borrowers. Using exposure to bank mergers as quasi-exogenous variation in market structure, we provide evidence that price differences between credit unions and banks contribute to this segmentation, consistent with adverse selection on borrower risk. These results highlight potential unintended consequences of bank consolidation.Discussant(s)
Sean Higgins
,
Northwestern University
Tianyue Ruan
,
National University of Singapore
Angela Ma
,
Boston College
Susan Cherry
,
University of Texas at Austin
JEL Classifications
- G5 - Household Finance
- H0 - General