Topic:

Consumer Financial Protection as Whack-a-Mole: Evidence from Credit Card Markets

Time&Date: 

13:00-14:30, 2020/11/6 (Friday)

Speaker:

Dr. Hong Ru (Nanyang Technological University)

Abstract:

In this paper, we document the changing landscape of credit card offers following the 2009 CARD Act in the US using detailed information from 1.3 million individual credit card offers. We find that after the CARD Act, when credit card companies are restricted to charge certain back-loaded fees (e.g., eliminate over-limit fees and reduce late fees), they tend to offer more low introductory APR programs with larger font sizes in the front of offer letters but higher regular APRs with smaller font sizes. Moreover, following the CARD Act, the readabilities of card offers become easier on the front pages but more difficult on the back pages where the detailed terms are presented. These patterns are more pronounced for less educated households. Our findings suggest that CARD Act changes the nature of backward loading in credit card offers: Salience is shifted to introductory APR teaser rates. At the same time, higher regular APRs are more back-loaded in offer letters.

Bio:

Dr. Hong Ru joined Nanyang Business School in NTU as an Assistant Professor of Banking & Finance division in 2015. His research interests include financial intermediary, Chinese economy, corporate finance, and household finance. Dr. Ru's researches have been published at top academic journals and presented at many conferences including AFA, EFA, NBER, SFS Cavalcade, and received best paper awards and research excellence award many times. His researches have been widely covered by media, such as Wall Street Journal, Washington Post, Strait Times, China Daily, NBER Digest, and ABFER Digest. Dr. Ru is also the research director of the Centre of Excellence International Trading (CEIT) in NTU and was the research director of the Centre for RMB Internalisation Studies (CRIS) in NTU. Dr. Ru received his Ph.D. in finance from the MIT Sloan School of Management in 2015.