Eventi del
28 2011 12:30 - 13:30
Via Roentgen 1, II floor, room 2 e4 sr 03
The economics of debt collection: ex-post enforcement of consumer credit contracts
Viktar Fedaseyeu, Univ. Bocconi
Abstract: The existence of third-party debt collection agencies cannot be explained by the benefits of specialization and economies of scale alone. Rather, the debt collection industry can serve as a coordination mechanism between creditors who can effectively impose harsh debt collection practices on consumers. As long as the costs of hiring third-party debt collectors are below the benefits from using harsh debt collection practices, the debt collection industry will create economic value for creditors. I show that effective debt collection expands the supply of credit because banks are willing to lend to relatively riskier borrowers who would otherwise be unable to obtain credit. As a result, the pool of borrowers becomes riskier and interest rates are higher when debt collection is effective.