The Payment Cards Center provides meaningful insights into developments in consumer credit and payments that are of interest not only to the Federal Reserve but also to the industry, other businesses, academia, policymakers, and the public at large. The center carries out its work through an agenda of research and analysis as well as forums and conferences that encourage dialogue incorporating industry, academic, and public-sector perspectives.
To listen to podcasts related to the Payment Cards Center, visit our podcasts page.
For information on all research on consumer credit and payments, go to our Program in Consumer Credit & Payments page.
Working Paper Released: Financial Benefits, Travel Costs, and Bankruptcy
(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.
Discussion Paper Released: Improving Experience in the Prepaid Card Industry: A Customer Service Workshop
(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
(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.
Working Paper Released: The Economics of Debt Collection: Enforcement of Consumer Credit Contracts
(468 KB, 46 pages)
Why does the debt collection industry exist and why is it so large? Some obvious explanations, such as economies of scale or specialization, do not address many aspects of this industry. In this paper, we propose an alternative explanation: Delegating debt collection is a way for a creditor to protect its reputation relative to the reputation of other creditors. We develop an application of common agency theory that explains how reliance on an unconcentrated industry of third-party debt collection agencies can implement an equilibrium with more intense collections activity than creditors would implement by themselves. The model also suggests a number of policy instruments that may improve the functioning of the collections market.