Bouncing out of the banking system: An empirical analysis of involuntary bank account closures

Dennis Campbell, F. Asís Martínez-Jerez and Peter Tufano

Journal of Banking & Finance, 2012, vol. 36, issue 4, 1224-1235

Abstract: Using a new database, we document the determinants of involuntary consumer bank account closures. During 2001–2005, approximately 30 million debit accounts were involuntarily closed for excessive overdrafting. We focus on multiple factors to explain this phenomenon: household economics and financial decision-making ability, social capital, bank policies, and the alternative financial services sector. Involuntary closures are more frequent in US counties with a larger fraction of single mothers, lower education levels, lower wealth, and higher unemployment. Closures are higher in communities with high property crime rates and low electoral participation. Bank policies have an independent relation to closures, with counties having more competitive banking markets and more multi-market banks experiencing higher closure rates; bank structure also seems to affect the speed at which banks adjust their policies to changes in household income. Finally, using both national data and a state-level shift in regulation, we find evidence that access to payday lending leads to higher rates of involuntary account closure.

Keywords: Household finance; Financial decision-making; Banking industry (search for similar items in EconPapers)
JEL-codes: G21 G28 J10 L00 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:4:p:1224-1235

DOI: 10.1016/j.jbankfin.2011.11.014

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