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Research Assistant to Prof. Jean-Francois Houde

University of Wisconsin-Madison

External Academic Consultant

Bank of Canada

Analyst

Bank of Canada

Research Assistant

Bank of Canada

PhD

University of Wisconsin-Madison

Economics & Finance

MS

University of Texas at Austin

Data Science

BA Hons.

University of Toronto

Economics

Best Third Year Finance Research Paper Scholarship

University of Wisconsin-Madison

Juli Plant Grainger Summer Research Fellowship

University of Wisconsin-Madison

Doctoral Fellowship

Social Sciences and Humanities Research Council

Women in Economics Scholarship

Bank of Canada

Best Undergraduate Paper

Canadian Economics Association

President's Scholar Program Scholarship

University of Toronto

Adverse Selection and Learning in Consumer Credit Market

Working Paper

This paper highlights a trade-off in credit markets between regulatory safeguards for informed consent and the informational frictions they can amplify. We find that requiring banks to garner explicit consent prior to raising clients' credit limits induces disproportionately higher take-up among riskier borrowers, worsening the risk profile of accounts receiving limit increases relative to the pre-policy regime. In response, we find banks decreased the size of the average credit limit increase and simultaneously gave more frequent limit increases. We develop a precautionary savings model with endogenous credit limits to study the role of learning and adverse selection in markets with incomplete information. We show that learning from acceptance decisions can rationalize our empirical results. Our model suggests that requiring consumer consent reduced lender profits but had negligible effects for consumers. Our key counterfactual demonstrates that lowering lender patience while requiring consumer consent would decrease both the frequency and size of limit increases.