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Thursday, July 24, 2014

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Program in Consumer Credit & Payments

About the Program in Consumer Credit and PaymentsAbout the Program in Consumer Credit and Payments

The program in Consumer Credit and Payments is a Bank-wide effort to advance our understanding of these markets and to make this information available to industry, consumers, policymakers, researchers, and the public at large. On these pages you will find research and analysis produced by the Bank's subject matter experts in Community Development Studies and Education, the Payment Cards Center, Research, Supervision and Regulation, and other areas.

Highlights

  • Special Report Released: The Effectiveness of Pre-Purchase Homeownership Counseling and Financial Management Skills

    This study is based on a long-term (five-year) effort undertaken by the Federal Reserve Bank of Philadelphia on the effectiveness of pre-purchase homeownership and financial management skills counseling. The study improves upon previous efforts by employing a different methodology that relies on an experimental design and tracks study participants' creditworthiness over time. View summary. Download the full report. PDF

  • Consumer Credit and PaymentsWorking Paper Released: Financial Benefits, Travel Costs, and Bankruptcy

    Using detailed balance sheet, income statement, and location data from 400,000 Canadian bankruptcies, we show that the cost of personal bankruptcy filers traveling to their bankruptcy trustees affects their bankruptcy choices. We use instrumental variables to control for potential endogeneity regarding the location choices of filers and trustees. We find that increased travel costs reduce the number of filings. Furthermore, for those individuals who do file, we find that their increased travel costs are compensated by higher financial benefits of bankruptcy. Filers without cars (higher travel costs), as well as those with jobs (higher opportunity costs), receive larger per-kilometer financial benefits from bankruptcy. Read more. PDF

  • Payment Cards Center UpdatesDiscussion Paper Released: Improving Experience in the Prepaid Card Industry: A Customer Service Workshop

    Contact Solutions LLC is a provider of third-party customer service for a number of government-sponsored prepaid card programs, including the U.S. Treasury Department's Direct Express prepaid card program. Since government-sponsored prepaid programs have encountered unique challenges related to customer service, the Payment Cards Center hosted a workshop in which Contact Solutions described some of these challenges and discussed how contact centers are responding to them. Read more. PDF

  • Consumer Credit and PaymentsDiscussion Paper Released: The Pattern of Appraisal Bias in the Third District During the Housing Crisis

    This study provides an empirical examination of the pattern of appraisal bias during the housing crisis in the Third Federal Reserve District. Based on a unique transaction-level appraisal data set, this study evaluates how the lack of market activity, the concentration of foreclosures, and the increased use of appraisal management companies, as well as other factors, impact the incidence of low appraisals during the crisis.

What's new

July 2014

Special Report Released: The Effectiveness of Pre-Purchase Homeownership Counseling and Financial Management Skills PDF
(829 KB, 49 pages)

Homeownership remains a cherished goal for many people. However, developments in mortgage products and drastic changes in the housing market have made the realization of becoming a homeowner more challenging. Fortunately, homeownership counseling is available to help navigate prospective homebuyers in their quest. But the effectiveness of such counseling over time continues to be contemplated. Previous studies have made important strides in our understanding of the value of homeownership counseling, but more work is needed. More specifically, homeownership education and counseling have never been rigorously evaluated through a randomized field experiment.

This study is based on a long-term (five-year) effort undertaken by the Federal Reserve Bank of Philadelphia on the effectiveness of pre-purchase homeownership and financial management skills counseling. The study improves upon previous efforts by employing a different methodology that relies on an experimental design and tracks study participants' creditworthiness over time. View summary. Download the full report. PDF

June 2014

Discussion Paper Released: The Pattern of Appraisal Bias in the Third District During the Housing Crisis PDF
(1.43 MB, 28 pages)

Appraisers have often been criticized for the inflated home values that were more prevalent during the housing boom, as well as overly conservative valuations during the housing bust. However, little research has been done to help understand how appraisal valuations respond to rapidly changing local market conditions and regulatory environments. This study provides an empirical examination of the pattern of appraisal bias during the housing crisis in the Third Federal Reserve District. Based on a unique transaction-level appraisal data set, this study evaluates how the lack of market activity, the concentration of foreclosures, and the increased use of appraisal management companies, as well as other factors, impact the incidence of low appraisals during the crisis. This study further examines the possible challenges created by low appraisals on the access to mortgage credit.

Working Paper Released: Financial Benefits, Travel Costs, and Bankruptcy PDF
(736 KB, 48 pages)

Using detailed balance sheet, income statement, and location data from 400,000 Canadian bankruptcies, we show that the cost of personal bankruptcy filers traveling to their bankruptcy trustees affects their bankruptcy choices. We use instrumental variables to control for potential endogeneity regarding the location choices of filers and trustees. We find that increased travel costs reduce the number of filings. Furthermore, for those individuals who do file, we find that their increased travel costs are compensated by higher financial benefits of bankruptcy. Filers without cars (higher travel costs), as well as those with jobs (higher opportunity costs), receive larger per-kilometer financial benefits from bankruptcy.

May 2014

Discussion Paper Released: Improving Experience in the Prepaid Card Industry: A Customer Service Workshop PDF
(931 KB, 29 pages)

Contact Solutions LLC is a provider of third-party customer service for a number of government-sponsored prepaid card programs, including the U.S. Treasury Department's Direct Express prepaid card program. Since government-sponsored prepaid programs have encountered unique challenges related to customer service, the Payment Cards Center hosted a workshop in which Contact Solutions described some of these challenges and discussed how contact centers are responding to them.

Working Paper Released: How Do Exogenous Shocks Cause Bankruptcy? Balance Sheet and Income Statement Channels PDF
(482 KB, 42 pages)

We examine whether exogenous shocks cause personal bankruptcy through the balance sheet channel and/or the income statement channel. For identification, we examine the effect of exogenous, politically motivated government payments on 200,000 Canadian bankruptcy filings. We find support for the balance sheet channel, in that receipt of the exogenous cash increases the net balance sheet benefits of bankruptcy (unsecured debt discharged minus liquidated assets forgone) required by filers. We also find limited support for the income statement channel, in that exogenous payments reduce bankruptcy filings from individuals whose current expenses exceed their current income.

April 2014

Report Released: Student Loan Trends in the Third Federal Reserve District PDF
(704 KB, 16 pages)

The state of the student loan market has received much attention in recent years, as the number of borrowers and their collective debt have risen dramatically. These trends have been particularly problematic in the wake of the 2007-09 recession because increased unemployment and suppressed income impair borrowers' ability to make payments on their loans. This report outlines the recent history of student borrowing in the Third Federal Reserve District and explores lending patterns, by the neighborhood income of the borrower, to better understand the implications for low- and moderate-income communities. Areas for further research to broaden understanding of the issue are also identified.

  • Last update: July 21, 2014

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