Bank Misconduct and Online Lending

Christoph Bertsch, Isaiah Hull, Yingjie Qi, Xin Zhang*

*Corresponding author for this work

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    We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

    Original languageEnglish
    Article number105822
    JournalJournal of Banking and Finance
    Number of pages23
    Publication statusPublished - Jul 2020


    • Bank misconduct
    • Consumer loans
    • Financial development
    • FinTech

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