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Update Newsletter: Fall 2011

Visiting Scholars

Payment Cards Center visiting scholars are invited to visit the Reserve Bank on a regular basis to meet with center staff and researchers in the Bank’s Research Department. Scholars may work independently on payment cards-related research or collaborate with the center’s analysts and Research Department economists to present papers and participate in the center’s activities. In this edition of Update, we feature abstracts from working papers published by two of the center’s scholars during 2011.

Working Paper 11-17:

LIMITED AND VARYING CONSUMER ATTENTION: EVIDENCE FROM SHOCKS TO THE SALIENCE OF BANK OVERDRAFT FEES

Jonathan Zinman, Dartmouth College (with Victor Stango, University of California, Davis)
April 2011

Abstract: The authors explore the dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a “stock” of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Consumers avoid overdrafts not by increasing balances but by making fewer debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.

Working Paper 11-11:

IS TECHNOLOGY-ENHANCED CREDIT COUNSELING AS EFFECTIVE AS IN-PERSON DELIVERY?

Michael Staten, University of Arizona (with John Barron, Purdue University)
February 2011

Abstract: This paper compares outcomes for borrowers who received face-to-face credit counseling with similarly situated consumers who opted for counseling via the telephone or Internet. Counseling outcomes are measured using consumer credit report attributes one or more years following the original counseling. The primary analysis uses data from a sample of 26,000 consumers who received credit counseling either in-person or via telephone during 2003. A second sample of 12,000 clients counseled in 2005 and 2006 was provided by one of the agencies to examine Internet delivery. Technology-assisted delivery was found to generate outcomes no worse — and at some margins better — than face-to-face delivery of counseling services.