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Modeling the Revolving Revolution: The Debt Collection Channel

Lukasz A. Drozd and Ricardo Serrano-Padial

American Economic Review, 2017, vol. 107, issue 3, 897-930

Abstract: We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We 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. Our 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.

JEL-codes: D14 D82 G21 L84 M15 O33 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20131029
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Working Paper: Modeling the Revolving Revolution: The Debt Collection Channel (2017) Downloads
Working Paper: Modeling the Revolving Revolution: The Debt Collection Channel (2016) Downloads
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