The Impact of Opt-In Privacy Rules on Retail Credit Markets: A Case Study of MBNA

U. S. privacy laws are increasingly moving from a presumption that consumers must object to ( opt out of) uses of personal data they wish to prohibit to a requirement that they must explicitly consent ( opt in ) to uses they wish to permit. Despite the growing reliance on opt-in rules, there has been little empirical research on their costs. This Article examines the impact of opt-in on MBNA Corporation, a diversified, multinational financial institution. The authors demonstrate that opt-in would raise account acquisition costs and lower profits, reduce the supply of credit and raise credit card prices, generate more offers to uninterested or unqualified consumers, raise the number of missed opportunities for qualified consumers, and impair efforts to prevent fraud. These costs would be incurred despite the fact that as of the end of 2000, only about two percent of MBNA\u27s customers had taken advantage of existing voluntary opportunities to opt out of receiving MBNA\u27s direct mail marketing offers. If Congress were to adopt opt-in laws applicable to financial information, the impact across the economy on consumers and businesses would be significant

The Emergence of Captive Finance Companies and Risk Segmentation of the Consumer Loan Market:Theory and Evidence

A parental seller with market power to some degree in its product market can earn rents. In this context, there is a gain to granting credit for the purchase of the product and thus the establishment of captive finance company for expanding the sales by offering loans to consumers who need financing for purchase of durable good. This paper examines the optimal behavior of such a durable good seller and its captive finance company when the consumer loan market is segmented into captive and independent lending institutions under symmetric and imperfect information on borrower’s creditworthiness. The model presents that one critical difference for captive finance company will be its credit standard. Specifically, the model indicates that captive finance company will follow a more lenient credit standard, leading to the prediction that the likelihood of repayment of a captive loan is lower than that of a bank loan, other things equal. This prediction is tested using unique data sets drawn from a major credit bureau in the U.S. The analysis of credit bureau data shows that a captive automobile loan is less likely to be repaid than a bank automobile loan, which supports the theoretical prediction.Monopolistic Competition, Consumer Loan Market, Captive Finance Company, Differential Loan Performances

Usage of Credit Cards Received Through College Student-Marketing Programs

This article provides benchmark measures of college student credit card usage by utilizing a pooled sample of over 300,000 recently opened credit card accounts. The analysis compares behavior over 12 months of account history for three groups of accounts: those opened by young adults through college student marketing programs; those opened through conventional marketing channels by young adults ages 18-24; and those opened through conventional channels by older adults. Results indicate that student marketed accounts have smaller balances, lower credit limits, and lower utilization rates than accounts opened by the other groups. Student accounts are more likely to be delinquent and have a higher likelihood of charge-off, but both the delinquency and charge-off rates for student accounts and non-student-marketed accounts of young adults converged within 24 months. These findings are consistent with card issuers’ statements that they establish student accounts with relatively low credit limits expecting that the large majority of new, young cardholders will learn how to manage a credit card, establish a credit history, and become longer-term customers

Credit Cards on Campus: Academic Inquiry, Objective Empiricism, or Advocacy Research? A Response

The authors react to the critique by Robert Manning and Ray Kirshak (in this issue) about the paper Usage of Credit Cards Received through College Student- Marketing Programs, which originally appeared in Journal of Student Financial Aid, 2004

Causes of Litigation in Workers\u27 Compensation Programs

By applying econometric analyses to case data from two states, Falaris, Link and Staten identify the economic incentives influencing the probability of litigation in workers\u27 compensation cases, and the probability that a contested case is pursued to verdict.https://research.upjohn.org/up_press/1075/thumbnail.jp

The School Health Index as an Impetus for Change

BACKGROUND: The increase in childhood obesity and prevalence of chronic disease risk factors demonstrate the importance of creating healthy school environments. As part of the Border Health Strategic Initiative, the School Health Index was implemented in public schools in two counties along the Arizona, United States-Sonora, Mexico border. Developed in 2000 by the Centers for Disease Control and Prevention, the School Health Index offers a guide to assist schools in evaluating and improving opportunities for physical activity and good nutrition for their students. CONTEXT: Between 2000 and 2003, a total of 13 schools from five school districts in two counties participated in the School Health Index project despite academic pressures and limited resources. METHODS: The Border Health Strategic Initiative supported the hiring and training of an external coordinator in each county who was not part of the school system but who was an employee in an established community-based organization. The coordinators worked with the schools to implement the School Health Index, to develop action plans, and to monitor progress toward these goals. CONSEQUENCES: The School Health Index process and school team participation varied from school to school. Individual plans were different but all focused on reducing in-school access to unhealthy foods, identified as high-fat and/or of low nutritional value. Ideas for acting on this focus ranged from changing the content of school lunches to discontinuing the use of nonnutritious foods as classroom rewards. All plans included recommendations that could be implemented immediately as well as those that would require planning and perhaps the formation and assistance of a subcommittee (e.g., for developing or adopting a district-wide health curriculum). INTERPRETATION: After working with the School Health Index, most schools made at least one immediate change in their school environments. The external coordinator was essential to keeping the School Health Index results and action plans on the agendas of school administrators, especially during periods of staff turnover. Staff turnover, lack of time, and limited resources resulted in few schools achieving longer-term policy changes

The School Health Index as an Impetus for Change

Background The increase in childhood obesity and prevalence of chronic disease risk factors demonstrate the importance of creating healthy school environments. As part of the Border Health Strategic Initiative, the School Health Index was implemented in public schools in two counties along the Arizona, United States-Sonora, Mexico border. Developed in 2000 by the Centers for Disease Control and Prevention, the School Health Index offers a guide to assist schools in evaluating and improving opportunities for physical activity and good nutrition for their students. Context Between 2000 and 2003, a total of 13 schools from five school districts in two counties participated in the School Health Index project despite academic pressures and limited resources. Methods The Border Health Strategic Initiative supported the hiring and training of an external coordinator in each county who was not part of the school system but who was an employee in an established community-based organization. The coordinators worked with the schools to implement the School Health Index, to develop action plans, and to monitor progress toward these goals. Consequences The School Health Index process and school team participation varied from school to school. Individual plans were different but all focused on reducing in-school access to unhealthy foods, identified as high-fat and/or of low nutritional value. Ideas for acting on this focus ranged from changing the content of school lunches to discontinuing the use of nonnutritious foods as classroom rewards. All plans included recommendations that could be implemented immediately as well as those that would require planning and perhaps the formation and assistance of a subcommittee (e.g., for developing or adopting a districtwide health curriculum). Interpretation After working with the School Health Index, most schools made at least one immediate change in their school environments. The external coordinator was essential to keeping the School Health Index results and action plans on the agendas of school administrators, especially during periods of staff turnover. Staff turnover, lack of time, and limited resources resulted in few schools achieving longer term policy changes