{"title":"Does the CARD Act affect price responsiveness? Evidence from credit card solicitations","authors":"Yiwei Dou , Geng Li , Joshua Ronen","doi":"10.1016/j.jbankfin.2024.107199","DOIUrl":null,"url":null,"abstract":"<div><p>The CARD Act restricts consumer credit card issuers’ ability to raise interest rates. We examine whether the Act influences the degree to which an issuer adjusts offered interest rates in response to changes in interest rates offered by other lenders in credit card solicitations—the price responsiveness. Using small business card offers as a control group, we find a significant decline in the price responsiveness after the Act. The decline is concentrated among other lenders’ rate reductions rather than rate increases and is more pronounced in areas with more subprime borrowers. The results underscore an unintended consequence of regulating the consumer credit market.</p></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"164 ","pages":"Article 107199"},"PeriodicalIF":3.6000,"publicationDate":"2024-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Banking & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S037842662400116X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
The CARD Act restricts consumer credit card issuers’ ability to raise interest rates. We examine whether the Act influences the degree to which an issuer adjusts offered interest rates in response to changes in interest rates offered by other lenders in credit card solicitations—the price responsiveness. Using small business card offers as a control group, we find a significant decline in the price responsiveness after the Act. The decline is concentrated among other lenders’ rate reductions rather than rate increases and is more pronounced in areas with more subprime borrowers. The results underscore an unintended consequence of regulating the consumer credit market.
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The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.
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