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Consumer credit analyst
Interests: credit cards, economics, wine and beer making, low-fi electronic music
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Great post. Reminds me of a working paper from the Philadelphia Fed. In the 90s a concept called universal default became popular with credit card companies, whereby accounts could be priced up to the penalty APR if the customer's credit report showed they were in default on another debt. Anecdotally, some issuers were more likely to use the practice than others, even if it was provisioned for in the CMA. The CARD Act prevents issuers from assessing the penalty APR in these situations, but apparently does not restrict them from calling in the balance (placing the account in default and closing it). Bottom line is, there may still be a link between paying your other debts and keeping your credit card account open, provided that consumers are aware of the potential of this occurring, and issuers are enforcing that part of their agreements. Would you be able to use your framework to measure the effects of these policies on debt repayment patterns?