Working Papers
Job Market Paper
Abstract: I show that price regulation and increased oversight can unintentionally reduce credit access and raise prices by driving out lenders with advanced risk-screening models. These lenders concentrate in less-creditworthy market segments, where their superior information helps overcome adverse selection. This makes them both the best positioned to serve borrowers with lower credit scores and the most impacted by regulatory intervention. To show this, I study the sudden enforcement of rate caps and oversight in the U.S. nonbank personal loan market. Using a difference-in-differences design around state regulation, I show that rate caps reduce credit by 10%, increase prices by 8%, and result in 21% of lenders exiting the market. I develop a structural model that separates the effects of interest rate caps from the fixed costs of regulatory oversight. The model, incorporating borrower heterogeneity, screening technologies, and adverse selection, shows that these regulations hurt low-risk borrowers who appear risky on paper. Counterfactuals suggest that raising the cap from 21% to 28% and cutting fixed regulatory costs by 45% could improve credit access for subprime borrowers.
Publications
with Erica Jiang, Gregor Matvos, Tomasz Piskorski and Amit Seru (01/2022) [Link to Publication]
AEA Papers and Proceedings, 2022
Press: Insights by Stanford Business [Link]
Works-in-Progress
with Zunda Winston Xu
Draft coming soon
What drives state regulation of nonbanks? We examine the factors influencing state-level regulation of nonbank financial institutions. As nonbanks—particularly fintech lenders—capture a growing share of the consumer credit market, states have responded with diverse regulatory approaches. To analyze these responses, we construct one of the first comprehensive databases of enforcement actions against nonbanks across 47 states over 20 years. Leveraging this dataset, we find no evidence that state regulations are primarily motivated by consumer protection or aiding subprime borrowers. Instead, we find preliminary evidence suggesting that state regulators may target nonbanks to “protect” state-chartered banks from competition. To explore this further, we investigate the “demand” side, where state-chartered banks lobby, file complaints, or make political donations to reduce competitive pressure, and the “supply” side, where state regulators respond due to incentives like job prospects or financial repression. Regulators may also aim to maintain financial stability, concerned that excessive competition could lead state-chartered banks to take on riskier behaviors.
Draft coming soon
Credit scores are the public signal that organizes consumer lending in the United States. I study what happens to credit-market equilibrium when policy degrades this signal, using the CARES Act's suppression of negative credit reporting as an identifying shock. With tradeline-level data on a 10% sample of U.S. consumers, I find that forbearance inflated credit scores by four points per quarter through information suppression rather than genuine financial improvement: borrowers whose scores were inflated default at rates 1.5 percentage points above what their scores predict, and delinquencies on non-covered accounts did not fall. The degraded signal reshapes equilibrium beyond forbearance recipients. Personal-loan APRs rise 80 basis points and denial rates 43 basis points in high-exposure counties, with effects concentrated among near-prime borrowers who never received forbearance but whose scores now pool with those who did. The information cost of broad-based debt relief thus extends to borrowers the policy was not designed to reach. A flag-and-preserve reporting design would deliver similar borrower protection without degrading the signal.
Draft coming soon
Do captured producer subsidies finance productive inputs? I answer this in the context of the U.S. higher education market. I analyze the Parent PLUS program using the October 2011 underwriting tightening, which denied roughly 100,000 borrowers and produced exogenous variation in credit supply to tuition-dependent colleges. Instrumenting PLUS dollars with pre-shock institutional exposure, I recover credit-supply elasticities of nonprofit-college overhead spending of 0.41 for administration, 0.35 for operations and maintenance, and 0.60 for academic support, within the 0.4–0.8 range the corporate-finance literature reports for bank-dependent for-profit firms, despite the absence of equity holders, takeover threat, or bankruptcy. Six-year completion at exposed institutions rises sharply for post-shock entering cohorts, with event-study coefficients scaling monotonically from +1.3 percentage points for the 2011 cohort to +6.0 for 2014, suggesting that the captured subsidy finances inputs that do not produce student outcomes. These findings suggest that the welfare loss from producer capture is dissipation, not redirection.