Does the CARD Act affect price responsiveness? Evidence from credit card solicitations

Yiwei Dou, Geng Li and Joshua Ronen

Journal of Banking & Finance, 2024, vol. 164, issue C

Abstract: The CARD Act restricts consumer credit card issuers’ ability to raise interest rates. We examine whether the Act influences the degree to which an issuer adjusts offered interest rates in response to changes in interest rates offered by other lenders in credit card solicitations—the price responsiveness. Using small business card offers as a control group, we find a significant decline in the price responsiveness after the Act. The decline is concentrated among other lenders’ rate reductions rather than rate increases and is more pronounced in areas with more subprime borrowers. The results underscore an unintended consequence of regulating the consumer credit market.

Keywords: Credit card solicitations; Price responsiveness; CARD act (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:164:y:2024:i:c:s037842662400116x

DOI: 10.1016/j.jbankfin.2024.107199

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