Information and consumer credit in Central and Eastern Europe

Akos Rona-Tas and Alya Guseva

Journal of Comparative Economics, 2013, vol. 41, issue 2, 420-435

Abstract: We present a critique of Behavioral Economics, the dominant approach to reforming the regulation of retail credit, and propose a new approach to managing uncertainty in consumer lending. This new approach draws on a different model of decision-making, Distributed Cognition, to improve contract origination, and it takes inspiration from the Legal Theory of Finance with respect to contract enforcement. We develop a set of stylized arguments about information-related problems and their possible solutions in Central and East European markets, discussing separately measures to protect lenders, such as requiring collateral, collection, screening and data sharing, and those to protect consumers, including disclosure, data privacy and regulation of automated individual decisions. Then we move to enforcement and using the empirical case of the Hungarian foreign exchange mortgage crisis we illustrate the importance of elasticity of law.

Keywords: Behavioral economics; Distributed cognition; Consumer credit; Mortgage; Data sharing; Data privacy; Automated individual decision; Legal theory of finance; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: D03 D11 D18 D8 K2 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:41:y:2013:i:2:p:420-435

DOI: 10.1016/j.jce.2013.03.012

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