Report
Modeling the Revolving Revolution: Debt Collection Channel
Policy File
Federal Reserve Bank of Philadelphia
03 Jan 2017
Abstract
The authors investigate the role of information technology (IT) in the collection of delinquent consumer debt. They argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending such as credit cards. The authors' model stresses the importance of delinquency and private information about borrower solvency. The prevalence of delinquency implies that the costs of debt collection must be borne by lenders to sustain incentives to repay debt. IT mitigates informational asymmetries, allowing lenders to concentrate collection efforts on delinquent borrowers who are more likely to repay.
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Details
- Title
- Modeling the Revolving Revolution: Debt Collection Channel
- Creators
- Lukasz DrozdRicardo Serrano-Padial
- Publication Details
- Policy File
- Publisher
- Federal Reserve Bank of Philadelphia
- Resource Type
- Report
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Identifiers
- 991021807100104721