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2 Results

Consumer Credit with Over-optimistic Borrowers

When lenders cannot directly identify behavioural and rational borrowers, they use type scoring to track the likelihood of a borrower’s type. This leads to the partial pooling of borrowers, which results in rational borrowers subsidizing borrowing costs for behavioural borrowers. This, in turn, reduces the effectiveness of regulatory policies that target mistakes by behavioural borrowers.

The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit

Staff Working Paper 2016-26 Jason Allen, Kiana Basiri
We examine the impact of the 2009 amendments to the Canadian Bankruptcy and Insolvency Act on insolvency decisions. Rule changes steered debtors out of division I proposals and into the more cost-effective division II proposals.