In the Red : overdrafts, payday lending and the underbanked. / Marco Di Maggio, Angela T. Ma, Emily Williams.

Format:

Book

Author/Creator:

Maggio, Marco Di, author.

Ma, Angela T., author.

Williams, Emily, author.

Series:

Working paper series (National Bureau of Economic Research) ; no. 28242

Language:

English

Subjects (All):

Econometric models.

Physical Description:

1 online resource (ix, 45 pages) : illustrations.

Place of Publication:

Cambridge, Mass. : National Bureau of Economic Research, 2020.

Summary:

The reordering of transactions from "high-to-low" is a controversial bank practice thought to maximize fees paid by low-income customers on overdrawn accounts. We exploit multiple class-action lawsuits resulting in mandatory changes to this practice, coupled with payday lending data, to show that after banks cease high-to-low reordering, low-income individuals reduce borrowing from alternative lenders. These consumers increase consumption, experience long-term improvements in overall financial health, and gain access to lower-cost loans in the traditional system. These findings highlight that aggressive bank practices create a demand for alternative financial services, highlighting an important link between the traditional and alternative financial systems.

Notes:

Description based on publisher supplied metadata and other sources.

Includes bibliographical references.