Bank misconduct and online lending

Christoph Bertsch, Isaiah Hull, Yingjie Qi and Xin Zhang

Journal of Banking & Finance, 2020, vol. 116, issue C

Abstract: We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

Keywords: Financial development; Consumer loans; Bank misconduct; FinTech (search for similar items in EconPapers)
JEL-codes: A13 G00 G21 K00 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:116:y:2020:i:c:s0378426620300893

DOI: 10.1016/j.jbankfin.2020.105822

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