Debtor income manipulation in consumer credit contracts

• 成果类型: Article
• 署名作者: Mikhed, Vyacheslav; Raina, Sahil; Scholnick, Barry; Zhang, Man
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of Alberta; National University of Singapore
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103851
• 发表日期: 2024
• 关键词: Consumer credit; Data misreporting; Financial distress; default

摘要

We show that forcing insolvent consumer debtors to repay a larger fraction of debt causes them to strategically manipulate the data they report to creditors. Exploiting a policy change that required insolvent debtors to increase debt repayments at an arbitrary income cutoff, we document that some debtors reduce reported income to just below this cutoff to avoid the higher repayment. Those debtors who manipulate income have a lower probability of default on their repayment plans, consistent with having access to hidden income. We estimate this strategic manipulation costs creditors 12% to 36% of their total payout per filing.