Credit counseling: a substitute for consumer financial literacy?

Disney, Richard; Gathergood, John; Weber, J�rg

Abstract

Is financial literacy a substitute or complement for financial advice? We analyze the decision by consumers to seek financial advice in the form of credit counseling. Credit counseling is an important component of the consumer credit sector for consumers facing debt problems. Our analysis accounts for the endogeneity of an individual's financial situation to financial literacy, and the endogeneity of financial literacy to exposure to credit counseling. Results show counseling substitutes for financial literacy. Individuals with better literacy are 60% less likely to use credit counseling. These results suggest that credit counseling provides a safety net for poor financial literacy.

Citation

Disney, R., Gathergood, J., & Weber, J. (2015). Credit counseling: a substitute for consumer financial literacy?. Journal of Pension Economics and Finance, 14(4), https://doi.org/10.1017/S1474747215000219

• Journal Article Type: Article
• Publication Date: Oct 1, 2015
• Deposit Date: Jan 26, 2016
• Publicly Available Date: Jan 26, 2016
• Journal: Journal of Pension Economics and Finance
• Print ISSN: 1474-7472
• Electronic ISSN: 1475-3022
• Publisher: Cambridge University Press
• Peer Reviewed: Peer Reviewed
• Volume: 14
• Issue: 4
• DOI: https://doi.org/10.1017/S1474747215000219
• Keywords: Credit counseling; financial advice; financial literacy; household finance
• Public URL: https://nottingham-repository.worktribe.com/output/759844
• Publisher URL: http://journals.cambridge.org/abstract_S1474747215000219