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Credit counseling: a substitute for consumer financial literacy?

Disney, Richard; Gathergood, John; Weber, Jörg

Authors

Richard Disney richard_d@ifs.org.uk

Jörg Weber joerg.weber@nottingham.ac.uk



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.

Journal Article Type Article
Publication Date Oct 1, 2015
Journal Journal of Pension Economics and Finance
Print ISSN 1474-7472
Electronic ISSN 1475-3022
Publisher Cambridge University Press (CUP)
Peer Reviewed Peer Reviewed
Volume 14
Issue 4
APA6 Citation Disney, R., Gathergood, J., & Weber, J. (2015). Credit counseling: a substitute for consumer financial literacy?. Journal of Pension Economics and Finance, 14(4), doi:10.1017/S1474747215000219
DOI https://doi.org/10.1017/S1474747215000219
Keywords Credit counseling; financial advice; financial literacy; household finance
Publisher URL http://journals.cambridge.org/abstract_S1474747215000219
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by/4.0





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