Cityscape Examines Consumer Credit

August 16, 2016  

Cityscape Examines Consumer Credit

The latest issue of Cityscape: A Journal of Policy Development and Research titled "Borrower Beware" features a research symposium on challenges related to the provision and use of consumer credit. Guest editors Padmasini Raman and Pamela Lee introduce the topic by noting the critical importance of consumer spending to the U.S. economy and the key role of credit access in allowing individuals to participate in the economic mainstream. They summarize the symposium articles, touching on the themes of how certain credit practices hinder economic participation, and how other practices can help. They conclude with a brief survey of recommendations contained in the articles, particularly the need for greater consumer protections and additional research.

The symposium articles present empirical findings, policy implications, and ideas for further research.

Kenneth P. Brevoort, Philipp Grimm, and Michelle Kambara analyze the characteristics of consumers who have limited or no credit history. They find that young, elderly, minority, and lower-income consumers are more likely to fall into these two categories and that alternative credit scoring models designed to improve these groups' access to credit largely fail to do so. They advocate further studies to examine the potential of alternative data.

Vanessa G. Perry, Carol M. Motley, and Robert L. Adams, Jr. use quantitative and qualitative content analysis to examine marketing tactics in mortgage loan advertisements. They note that while informational ads must be truthful and evidence-based by law, the surveyed ads generally lacked factual or verifiable information and are geared to evoke an emotional or affective response. They also find significant differences in ad content placed in general versus ethnic-specific media and discuss the policy implications of these findings.

Leslie Parrish uses industry data to find that despite improved protections enacted by the Federal Trade Commission in 2010, for-profit debt settlement programs are likely to have a negative financial impact on consumers, and that debt settlement outcomes today do not differ markedly from outcomes prior to the 2010 rule. She suggests a number of measures to help lessen consumer risk.

Neil S. Mayer and Kenneth Temkin analyze the effects of prepurchase homebuyer counseling and education on the performance of mortgages. Employing methods that avoid selection bias, they conclude that borrowers who received prepurchase counseling from NeighborWorks® America affiliates had lower chances of becoming delinquent on their mortgage than borrowers who did not receive any counseling.

Sarah Gerecke discusses the role of consumer protections in the credit marketplace and notes important insights and policy implications offered by two of the symposium articles.

In addition to the symposium, the issue features two refereed papers: Laura Carrillo, Mary Pattillo, Erin Hardy, and Dolores Acevedo-Garcia's analysis of housing choices among low-income Hispanic households in Chicago, and Jesus N. Valero and Hee Soun Jang's study of the role of nonprofit organizations in federal homeless policy networks.

Articles in this issue's regularly appearing departments include "Trend-Spotting in the Housing Market," by Nikos Askitas, in Data Shop; "Leveling the Playing Field: School District Spending in Diverse Communities," by Alexander Din, in Graphic Detail; "Breathing Wall: Concept and Thermal Performance," by Zhiqiang (John) Zhai, in Industrial Revolution; "Promoting Access to Affordable Housing Finance: Morocco's Fogarim Guarantee Fund and U.S. Housing Finance," by Alven Lam and Christopher Feather, in Foreign Exchange; and "Tracking and Interviewing Family Options Study Participants," by Debi McInnis and Brenda Rodriguez, in Evaluation Tradecraft.

New on HUD User