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Consumer protection in the financial market has several dimensions. From a formal point of view, consumer rights are guaranteed by law. Educational programs are implemented in schools and the media to promote knowledge and responsible use of financial products and services. Despite the efforts made, the number of incorrect and suboptimal financial decisions is so high that the risk of households falling into excessive debt remains significant. The limited effectiveness of the law led to the claim that only effective education can reduce the risk of suboptimal financial decisions. Unfortunately, the efforts made in this area are not fully satisfactory. The study of financial knowledge of consumers, which was conducted in Poland in January 2024, aimed to verify consumer errors and their nature. As part of the consumer study, not only declared knowledge was verified, but also actual knowledge. The researchers' doubts resulted from a comparison of the results of scientific research in this area with the current market situation. Consumers declare a high level of knowledge of economic and financial concepts. In practice, however, they make mistakes that do not only indicate behavioral cognitive errors but also a lack of knowledge. The test questions were constructed in such a way as to verify the declared knowledge (based on verification questions). These showed that the actual level of knowledge was lower than the declared one. A review of the literature and studies of financial knowledge and financial competence of consumers in Central European countries was also carried out. Analysis of the results allowed for the formulation of conclusions regarding the educational gap in relation to social characteristics. The conclusions resulting from the study raise questions about the effectiveness of the educational methods used and indicate possible directions of changes in the consumer regulation policy, the aim of which is to ensure a high level of consumer protection. [ABSTRACT FROM AUTHOR]

Sixteen jurisdictions in the United States prohibit payday lending through stringent usury laws or well‐established nonprofitable 36% interest rate caps. Yet over one in 10 consumers residing in these jurisdictions borrowed payday loans in the past 5 years. This raises questions about actual policy implementation and enforcement. We employ data from the 2018 National Financial Capability Study to investigate if associations between payday lending prohibitions and payday borrowing differ by degree of enforcement. We find that nuances in degree of enforcement among restrictive states are not associated with payday borrowing likelihoods. However, these nuances appear when examining payday borrowing frequency, particularly when controlling for consumers' financial circumstances and when conditioning on alternative financial services consumers. We consistently note the highest borrowing behaviors for states sans regulation. Policymakers may consider strengthening enforcement in cases where the primary goal is preventing or reducing payday borrowing. [ABSTRACT FROM AUTHOR]

Research background: People who take non-banking loans are primarily perceived as excluded from accessing bank services. The growth of e-commerce and the increasing digitalisation of customer interactions with banks was particularly accelerated by the COVID-19 pandemic (the first 'black swan'). These processes have also influenced the rapid growth of the LendTech (LT) sector within FinTech with its digital loans and buy-now-pay-later (BNPL) services. The war in Ukraine (the second 'black swan') has led to an energy crisis, increased inflation, interest rates and credit costs, and reduced credit accessibility. In this context, the following research questions are addressed: Are the LT and banking sectors complementary or substitutive in the area of consumer financing? Does complementarity apply to all customer segments and loan amounts? How does the extent of complementarity or substitutability of the LT sector depend on, and to what extent do changes in the regulatory and macroeconomic environment affect, the interaction between the banking and LT sectors? Purpose of the article: The aim of the article is to identify trends in the LT sector within FinTech in the context of assessing the scale and determinants of current and future complementarity of the non-bank sector and the banking sector in the area of consumer credit in time of black swans. An additional purpose of the article is to estimate revenues from the basic operating activities of companies from the on-line channel. Methods: The research process was multi-stage and the research procedure was structured. Due to the lack of a uniform source of data on LT products and services, the study used many data sources -- data from the Credit Information Bureau, a primary nationwide survey on LT users a primary survey of people representing LT's managerial staff. The selection of LTs was carried out according to the concept of the monetary sampling unit. The Horvitz-Thompson estimator with Sen-Yates-Grundy variance form was used to estimate net operating income for LT from the online channel in 2021. Findings & value added: The LT companies surveyed state that black swans (the COVID-19 pandemic and the war in Ukraine) and the current macroeconomic situation have not significantly affected demand for non-banking loans. The reduction in the opportunities for the LT sector as a result of anti-usury regulations will only lead to a shift in consumer demand to the pawnshop sector and the shadow economy, which will be detrimental to consumers. Complementarity between LT and the banking sector is revealed especially in crisis situations, thus limiting the effects of market shock (limited supply of loans offered by banks). In periods of stabilisation, a rather clear division of preferences is noticeable - in the case of seniors and loans for higher amounts, banks dominate, while in the case of lower amounts and in younger age groups, non-bank institutions are more popular. The mechanism by which shrinking banking services are replaced by LT in short-term crises confirms the importance of LT in balancing the Consumer Finance market in the face of unstable periods. From a medium- and long-term perspective, it should be noted that inflation and rising interest rates will increase the scale of credit exclusion in commercial banks, shifting part of the demand to the non-bank sector. These phenomena have an international dimension. Similar observations were made already in 2012 by the CFPB in the USA and the British FTA, when analysing the consumer finance market immediately after the subprime crisis, emphasising the effects of limiting access to bank consumer loans and the resulting growth of the LT market (Gębski, 2013). [ABSTRACT FROM AUTHOR]

The emergence of BigTech companies in the financial services sector has raised concerns about their potential to disrupt traditional banking and establish their own financial institutions. This research investigates the extent of BigTechs' activities in payments and finance and explores their intentions in disrupting the banking sector. The study adopts a qualitative methodology to critically analyse market reports and credible market intelligence websites and official websites of news agencies. The findings reveal that BigTechs' activities are selective and aimed at supporting their core businesses in commerce, technology, advertising, and social media, rather than disrupting banking. However, their involvement in Buy Now Pay Later (BNPL) financing poses a challenge to retail banks, prompting Islamic banks to establish their own BNPL facilities. Procedural complexities related to Sharīʿah compliant structuring can be addressed using financial technologies like smart contracts and payment gateways. Islamic banks could also collaborate with FinTechs to create frequently used Muslim lifestyle apps or super apps that offer embedded finance for the ḥalāl economy. The study concludes that Islamic banks should consider these opportunities to meet the younger customers' mobile shopping and social media communication habits.

Analyses done using the survey response of 451 credit cardholders in the northern region of West Malaysia have shown that credit cardholder repayment pattern differed based on their demographic profile. Specifically, the study found that credit cardholders who were younger and earned a lower income tended to make poorer repayment decisions. In contrast, those with higher academic qualifications tended to make better repayment decisions. Further analyses also revealed that behavioral biases were better at predicting those who made full payment of the outstanding balance and those who paid more than the minimum amount, but failed to predict those who only paid the minimum amount or less. In addition, it was found that overspending emerged as the strongest predictor which discriminated among the three repayment groups, followed by risk aversion, myopia and impulsiveness. [ABSTRACT FROM AUTHOR]

Machine learning (ML) algorithms and the artificial intelligence (AI) systems that they enable are powerful technologies that have inspired a lot of excitement, especially within large business and governmental organizations. In an era when increasingly concentrated computing power enables the creation, collection, and storage of “big data,” ML algorithms have the capacity to identify non-intuitive correlations in massive datasets, and as such can theoretically be more efficient and effective than humans at using those correlations to make accurate predictions. However, biases can be encoded in the datasets on which ML algorithms are trained, arising from poor sampling strategies, incomplete or erroneous information, and the social inequalities that exist in the actual world. Additionally, the inherent complexities of ML algorithms that defy explanation even for the most expert practitioners can make it difficult, if not impossible, to identify the root causes of unfair decisions. That same opacity also presents an obstacle for individuals who believe that they have been evaluated unfairly, want to challenge a decision, or try to determine who should—or even ​could​—be held accountable for mistakes.This paper surveys current research in and around ML and AI, drawing primarily from work in computer science, social sciences, and the law. Although it examines material across several contexts, the underlying intention is to consider how insights and lessons from a number of different domains can be applied within consumer financial services. And while there are certainly implications for organizational planning and strategy, the analytical focus rests primarily on the individuals and groups who are impacted directly by AI systems’ decision-making processes. This paper is organized as follows: Section I explores the social contexts with which ML and AI technologies are integrated, and the structural inequalities that influence—and are in turn influenced by—those integrations. Section II surveys ongoing research into data quality, fairness, transparency, and accountability; specific examples of problems that have emerged around these issues; and some of the methods and tools that have been proposed for managing those problems. Finally, the conclusion examines several actual-world cases of ML and AI’s human impacts and the challenges and opportunities posed by algorithmic governance.

This study was conducted to investigate the effect of learner characteristics on online interaction, the relationship between online interaction and learner satisfaction, and variances in online interaction across different courses. Three types of online interaction were studied: learner-instructor interaction, learner-learner interaction, and learner-content interaction. To achieve the goals of this study, a survey was sent out to students enrolled in three online consumer finance courses at a large research university. Findings reveal that females rated the instructor-student interaction higher than males. Studentcontent interaction correlated the most with learner satisfaction. Learner-instructor and learner-learner interaction varied significantly among the three courses, while no statistical difference was found in learner-content interaction across the courses. This study provides insights for instructors, instructional designers, and administrators to implement and improve their design of different types of interaction in online course to enhance learner satisfaction and the quality of online courses. [ABSTRACT FROM AUTHOR]

Analyses done using the survey response of 451 credit cardholders in the northern region of West Malaysia have shown that credit cardholder repayment pattern differed based on their demographic profile. Specifically, the study found that credit cardholders who were younger and earned a lower income tended to make poorer repayment decisions. In contrast, those with higher academic qualifications tended to make better repayment decisions. Further analyses also revealed that behavioral biases were better at predicting those who made full payment of the outstanding balance and those who paid more than the minimum amount, but failed to predict those who only paid the minimum amount or less. In addition, it was found that overspending emerged as the strongest predictor which discriminated among the three repayment groups, followed by risk aversion, myopia and impulsiveness.

This research discusses how the law protects business actors from consumers who do not have good faith in carrying out their obligations in paying installments. So, this study aims to analyze, prove, and find value on the principle of default committed by consumers in cases between PT. SINARMAS MULTIFINANCE MEDAN BRANCH with its debtors in decision No. 688/Pdt.Sus-Bpsk/2018/PN Medan. Based on the objectives to be achieved, this study uses a normative juridical method using references from various books, journals, legislation, and other supporting literacy. The results of this study reveal that the agreement given by the consumer finance party regarding the rights and obligations imposed on the debtor is to pay instalments, if this obligation is not fulfilled then a subpoena can be given. If it is not fulfilled, then the goods that are used as objects can be withdrawn, as a result the debtor can lose the right to the goods, and the consumer finance party can terminate the agreement unilaterally. Finally, this study concludes that there has been an act of default by the debtor to the creditor. Furthermore, he found that the form of protection for consumer finance for motorized vehicles for consumer default, namely the agreement of substitution power for unit acquisition and the sale of fiduciary guarantees.

Copyright of Bait Al-Mashura Journal is the property of Bait Al-Mashura Journal and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using a unique setting of an online peer-to-peer lender, I show that banks expand credit access for consumers who obtain FinTech loans. Consistent with FinTech relieving information frictions, this effect is stronger for more credit-constrained consumers. Many borrowers, especially higher-quality ones, use peer-to-peer loans to repay expensive revolving debt. Yet, debt financing and credit score changes cannot fully explain higher bank credit. The increase in bank credit access is stronger when information sets between banks and peer-to-peer lenders diverge more. These results highlight information spillovers as a novel mechanism through which FinTech lending can relieve financial constraints for consumers. This paper was accepted by Tomasz Piskorski, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4319. [ABSTRACT FROM AUTHOR]

We use an event study approach to examine the economic consequences of hospital admissions for adults in two datasets: survey data from the Health and Retirement Study, and hospitalization data linked to credit reports. For non-elderly adults with health insurance, hospital admissions increase out-of-pocket medical spending, unpaid medical bills and bankruptcy, and reduce earnings, income, access to credit and consumer borrowing. The earnings decline is substantial compared to the out-of-pocket spending increase, and is minimally insured prior to age-eligibility for Social Security Retirement Income. Relative to the insured non-elderly, the uninsured non-elderly experience much larger increases in unpaid medical bills and bankruptcy rates following a hospital admission. Hospital admissions trigger less than 5 percent of all bankruptcies.

This article explores when consumers avoid learning information about their credit scores and how viewing one's credit score impacts future credit scores. This paper explores the impact of information avoidance in the context of consumer finance. Specifically, under what circumstances do individuals avoid information about their credit, and how does avoiding this information affect their future credit scores? Using data from a consumer finance platform, we find that a decline in credit score decreases the likelihood that an individual views her credit report in the future. We then measure the impact of receiving information on future credit scores, especially for those likely to avoid information. To obtain a causal local average treatment effect, we use variation in whether an individual views her credit report induced by email campaign A/B tests on a subsample of users who do not opt out of email communication. We find heterogeneous effects of information on credit scores. For individuals who were more likely to avoid information (users whose credit scores were decreasing), viewing their credit reports further decreases credit scores, whereas information increases credit scores for individuals less likely to avoid information. This finding suggests that encouraging individuals to access information when they are more likely to avoid information may worsen their financial health. We discuss the implications for firms' targeting strategies in retention efforts. [ABSTRACT FROM AUTHOR]

Age-related deterioration in cognitive ability may compromise the ability of older adults to make major financial decisions. We explore whether knowledge and expertise accumulated from past decisions can offset cognitive decline to maintain decision quality over the life span. Using a unique dataset that combines measures of cognitive ability (fluid intelligence) and of general and domain-specific knowledge (crystallized intelligence), credit report data, and other measures of decision quality, we show that domain-specific knowledge and expertise provide an alternative route for sound financial decisions. That is, cognitive aging does not spell doom for financial decision-making in domains where the decision maker has developed expertise. These results have important implications for public policy and for the design of effective interventions and decision aids.

In spite of the lengthy 2009 to 2019 economic expansion, the media reported through 2019 that large numbers of Americans struggled to make ends meet. This study assembles a large set of responses to diverse survey questions involving financial well-being, spanning the period 1976 to 2019. I take care to distinguish the degree of financial distress elicited in these survey questions, and I use spline-curve econometrics to extract a time series of the percent of Americans who struggle to make ends meet. The exercise indicates that this number has ranged from about 10 percent to about 25 percent; during 2019, it was near its historic low. I then briefly discuss the relationship of financial distress to the business cycle. [ABSTRACT FROM AUTHOR]

There are hosts of dynamics contributing to financial inclusion. These sources may be both from the demand side and supply side. The government and financial institutions use several policy initiatives to encourage the supply of financial services to the excluded sector. However, the demand-side factors of financial access have attracted little focus. This study provides an overview of sources of financial inclusion and highlights the policy measures from the perspective of consumers of financial services - also known as the demand-side. The secondary series data were estimated using the ordinary least square method. The findings of the study indicate that economic growth and the number of internet users exert a positive and significant effect on financial access in East Africa. On the other hand, the result indicates that the deposit interest rate was insignificant. The study recommends the deposit interest rate be made attractive to promote continuous saving and access to loanable funds in the financial market. The policy strategies therefore should be aimed at cultivating a conducive financial system that upholds financial access-demand-driven rates to stimulate financial growth. [ABSTRACT FROM AUTHOR]

Using a multidisciplinary approach, this article explores the evolution of the Japanese consumer credit market in parallel with the rise in household debt. It analyses the institutional environment, labour market changes and the transformation of borrowers’ motives, with a focus on the growth of the small loan market driven by the sarakin from the 1960s to the 2000s. It also examines the forces driving regulatory change by considering the tensions between stakeholders (government, banks, sarakin, borrowers) and their conflicts of interest, leading in fine to the revision of the Moneylenders Law in 2006. The revision of this law represents a major institutional change for the Japanese consumer credit market in general, and the personal loan sector in particular, with the fall of the sarakin.

Copyright of Bait Al-Mashura Journal is the property of Bait Al-Mashura Journal and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The economic crisis triggered by the COVID-19 outbreak has severely affected the global economy. The ultimate scale of the recession is yet to be determined, but it is likely to be the most dramatic slump since World War II. The impact of the crisis on the financial sector, especially consumer finance, could almost instantly be observed. The article shows how determination and consistency in regulatory actions counteracts the effects of the pandemic crisis for the banking sector and consumer finance. The conducted research has shown the existence of a number of social phenomena typical of this type of global crisis, such as shopping panic, reduced creditworthiness of households related to loss of income, unemployment and increased crime. At the same time, the actions of financial market regulators turned out to be very effective (no negative structural phenomena occurred in the financial market). The accuracy of the selection of instruments and the speed of action limited the social and financial effects of the pandemic, including a loan repayment memorandum, limiting the cost of consumer loans and supporting the banking sector, which will limit the scale of excessive household debt and consumer bankruptcies, and companies were also supported. The research was conducted on the basis of available literature on the subject, market analyses and a review of regulations implemented at the central level and in individual EU member states.

To ensure that consumers understand financial products’ “costs, benefits, and risks,” the Consumer Financial Protection Bureau has been redesigning mandated disclosures, primarily through iterative lab testing. But no matter how well these disclosures perform in experiments, firms will run circles around the disclosures when studies end and marketing begins. To meet the challenge of the dynamic twenty-first-century consumer financial marketplace, the bureau should require firms to demonstrate that a good proportion of their customers understand key pertinent facts about the financial products they buy. Comprehension rules would induce firms to inform consumers and simplify products, tasks that firms are better equipped than the bureau to perform.

Using a multidisciplinary approach, this article explores the evolution of the Japanese consumer credit market in parallel with the rise in household debt. It analyses the institutional environment, labour market changes and the transformation of borrowers' motives, with a focus on the growth of the small loan market driven by the sarakin from the 1960s to the 2000s. It also examines the forces driving regulatory change by considering the tensions between stakeholders (government, banks, sarakin, borrowers) and their conflicts of interest, leading in fine to the revision of the Moneylenders Law in 2006. The revision of this law represents a major institutional change for the Japanese consumer credit market in general, and the personal loan sector in particular, with the fall of the sarakin. [ABSTRACT FROM AUTHOR]

• Home ownership acts as a moderating factor in the relationship between financial knowledge and financial behaviour of adult citizens. • Home ownership explains the financial behaviour of homeowners. • Financial knowledge has greater potential to improve the financial behaviour of renters. The relationship between financial knowledge and financial behaviour has been widely studied in previous literature. Numerous works conducted in different contexts have found a positive relationship between them. The objective of this paper is to test the effect of homeownership on this relationship. To this aim, we perform extended ordered probit regressions. We use data from the Survey of Financial Competences conducted by the supervisor of the Spanish securities markets and the Spanish central bank. The results show evidence that supports the hypothesis that home ownership has a moderating effect on the relationship between financial knowledge and financial behaviour. [ABSTRACT FROM AUTHOR]

• The developmental consumption is growing faster than the total consumption. • Household consumption credit significantly promote developmental consumption. • The above effect is more evident for non-farm households. • Investing in stocks has a limited effect on raising household income. This paper selects the China Household Finance Survey (CHFS) for 2017, 2019, and 2021. It examines the differences in the effects of consumer finance play between rural and urban areas using the final screened 9,875 households as the research sample. It is found that household savings, insurance, and stock assets are positively related to household consumption expenditure and consumption structure upgrading; household consumption credit can promote developmental consumption expenditure, and the promotion effect of consumer finance factors is more evident for non-farm households. [ABSTRACT FROM AUTHOR]

The purpose of the article is to identify marketing strategies that you can implement the BBVA Bank Guadalajara de Buga (Colombia), to increase its market share, to the product "Crédito de Libranza" directed segment of teachers in the public sector, due to the importance that has been gaining the product and the entry of other competitors. For this financial consumer profile is analyzed, from an operational point of view, as a subject requiring banking services for everyday needs and the Bank that customer loyalty strategies life. It was found that purchasing portfolio is attractive as an element to provide, therefore should be part of the Bank's strategy, through appropriate interest rates and the ongoing analysis of customer for their behavior and preferences, so that the adjustment strategy in time.

The hypothesis that people with more financial literacy make better financial decisions and show positive financial behaviors is crucial for more than one stakeholder. A weak connection between financial literacy and financial behaviors jeopardizes the opportunity to invest in financial education and to develop a consumer protection framework based on the chance to develop aware and responsible financial consumers. This study uses data from different countries (Germany, France, Italy, Sweden, the UK), using surveys devised and fielded specifically to measure financial literacy and in order to assess if the availability of a broad set of items on financial literacy allows to develop new measures of financial literacy to better understand the relationship between financial literacy and financial behaviors. The well-established Lusardi−Mitchell questions are compared with measures that differ in terms of number of items (the “50-items” index), range of topics (the “5-specific” index), or selection process of the items (the “unbiased” index). Results support the hypothesis that the Lusardi−Mitchell questions remain a good measure in a first-step analysis, but a deeper understanding of the connection between financial literacy and financial behaviors benefits from the measures proposed in the study, that should be considered as additional assessment tools in financial literacy research.

Since the late 1980s, young people aged 18-34 have increasingly stated that their primary reason for increasing their saving rate has been to protect themselves against uncertain future times. The rate of increase in 'precautionary' savings exceeds that of all other age groups, and has occurred against a backdrop of declining real income, a tepid economic recovery from the Great Recession of 2008-09, a tightened credit environment, and changing household demographics. This study considers the impact of these and other elements on young adults' decisions to save for precautionary purposes, and considers what possible impacts these developments might have for broader consumption and production trends in the U.S economy. [ABSTRACT FROM AUTHOR]

Consumer credit regulations usually require that lenders disclose interest rates. However, in the absence of specific prominence requirements, lenders can conceal the interest rate in the fine print while still complying with the law. I examine the effect of such a strategy using a field experiment in Brazil in which a credit card company offered their clients payment plans to pay off their balances. Using randomized contract interest rates and the degree of rate disclosure, I show that most clients are rate sensitive, whether or not rates are prominently disclosed. The elasticity of payment plan enrollment with respect to the interest rate ranges from −0.711 to −0.880. High-risk clients are an exception; these clients are rate sensitive only when disclosure is prominent. I also show that clients are influenced by nudges that favor longer-term contracts. Conditional on enrollment, the proportion of clients who choose a longer-term contract is 40 percentage points higher when a longer-term contract is featured in the advertisement layout. This effect, however, is weaker when stakes are higher. Data, as supplemental material, are available at . This paper was accepted by Wei Jiang, finance. [ABSTRACT FROM AUTHOR]

Utilizing the 2013 Survey of Consumer Finances data, the present study aims to examine the role of the Internet in carrying a credit card balance among US households. The central question of this study is whether or not households with Internet access have more favorable attitudes toward incurring more credit card balance. This study further investigates whether education, income, gender, age, race, etc., make any differences in carrying credit card debt when households have access to the Internet. Our results with the Tobit model show that having access to the Internet increases the probability of carrying a positive credit card balance by 4% to 5% compared to those who do not have access to the Internet. This result does not apply to older Americans. Our results further indicate that education decreases the probability of carrying a positive credit balance for households that have access to the Internet, while income and liquid assets may have little positive effect on that probability. The results suggest that Internet leads to more debt, but education could alleviate that debt. [ABSTRACT FROM AUTHOR]

The mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default onmortgages and home equity lines of credit at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage nonrecourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for housing and nonhousing debts. Our analysis highlights the interconnectedness of debt repayment decisions. [ABSTRACT FROM AUTHOR]

We estimate the response of consumer debt portfolios to pronounced housing market swings from 1999 to 2012 using Equifax-sourced credit report data and a variety of identification approaches. We find: (i) the extraordinary climb in home equity debt from 2002 to 2006 is an expression of a stable, longer-term relationship between house price growth and home equity borrowing; (ii) all preboom homeowners, and older and prime postboom homeowners, demonstrate near dollar-for-dollar substitution between (expensive) credit card and (cheap) home equity debt in response to home equity changes; and (iii) little evidence of substitution between home equity and student loan debt. [ABSTRACT FROM AUTHOR]

Age-related deterioration in cognitive ability may compromise the ability of older adults to make major financial decisions. We explore whether knowledge and expertise accumulated from past decisions can offset cognitive decline to maintain decision quality over the life span. Using a unique dataset that combines measures of cognitive ability (fluid intelligence) and of general and domain-specific knowledge (crystallized intelligence), credit report data, and other measures of decision quality, we show that domain-specific knowledge and expertise provide an alternative route for sound financial decisions. That is, cognitive aging does not spell doom for financial decision-making in domains where the decision maker has developed expertise. These results have important implications for public policy and for the design of effective interventions and decision aids. [ABSTRACT FROM AUTHOR]

Credit scores are the most widely used instruments to assess whether or not a person is a financial risk. Credit scoring has been so successful that it has expanded beyond lending and into our everyday lives, even to inform how insurers evaluate our health. The pervasive application of credit scoring has outpaced knowledge about why credit scores are such useful indicators of individual behavior. Here we test if the same factors that lead to poor credit scores also lead to poor health. Following the Dunedin (New Zealand) Longitudinal Study cohort of 1,037 study members, we examined the association between credit scores and cardiovascular disease risk and the underlying factors that account for this association. We find that credit scores are negatively correlated with cardiovascular disease risk. Variation in household income was not sufficient to account for this association. Rather, individual differences in human capital factors-educational attainment, cognitive ability, and self-control-predicted both credit scores and cardiovascular disease risk and accounted for ∼45% of the correlation between credit scores and cardiovascular disease risk. Tracing human capital factors back to their childhood antecedents revealed that the characteristic attitudes, behaviors, and competencies children develop in their first decade of life account for a significant portion (∼22%) of the link between credit scores and cardiovascular disease risk at midlife. We discuss the implications of these findings for policy debates about data privacy, financial literacy, and early childhood interventions. [ABSTRACT FROM AUTHOR]