Consumer protection and contingent charges

Mark Armstrong and John Vickers

MPRA Paper from University Library of Munich, Germany

Abstract: Contingent charges for financial services, such as fees for unauthorized overdrafts, are often controversial. We study the economics of contingent charges in a stylized setting with naive and sophisticated consumers. We contrast situations where the naive benefit from the presence of sophisticated consumers with situations where competition works to subsidize the sophisticated at the expense of the naive, arguably unfairly. The case for regulatory intervention in these situations depends in good part, but not only, on the weight placed on distributional concerns. The economic and legal issues at stake are well illustrated by a case on bank charges recently decided by the UK Supreme Court.

Keywords: Consumer protection; retail banking; bounded rationality; economics of contracts (search for similar items in EconPapers)
JEL-codes: D18 G14 G21 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-cbe and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (79)

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Related works:
Journal Article: Consumer Protection and Contingent Charges (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37239

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