Fuzzy Math, Disclosure Regulation and Market Outcomes: Evidence from Truth-in-Lending Reform

• 成果类型: Article
• 署名作者: Stango, Victor; Zinman, Jonathan
• 署名单位: University of California System; University of California Davis; Dartmouth College
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq089
• 发表日期: 2011
• 页码: 506
• 关键词: price-discrimination; CONSUMER KNOWLEDGE; credit; INFORMATION; COSTS; requirements; constraints; economies; awareness; industry

摘要

We posit that consumer lenders shroud interest rates and market low monthly payments to price discriminate on fuzzy math or payment/interest bias: consumers' pervasive tendency to underestimate borrowing costs when an interest rate is not disclosed. We test whether mandated disclosure changes lenders' ability to price discriminate using within-household interactions between payment/interest bias and policy-induced variation in the strength of Truth-in-Lending Act (TILA) enforcement across lenders and time. Weak TILA enforcement substantially widens the gap between rates paid by more-biased and less-biased borrowers. TILA compliance costs appear to increase interest rates overall, making the net effect on interest rates ambiguous. (JEL D01, D03, D10, D40, G20, K20, K42, L50)