Antoinette Schoar, Global Virtual Seminar Series on Fintech
Date Aired: April 24, 2020
Stewart C. Myers-Horn Family Professor of Finance and Entrepreneurship
MIT Sloan School of Management
Antoinette Schoar is Stewart C. Myers-Horn Family Professor of Finance and Entrepreneurship at the MIT Sloan School of Management. She holds positions at Journal of Finance and the NBER Corporate Finance group.
Professor Schoar’s research interests include entrepreneurship and financing of small businesses in emerging markets as well as household finance and intermediation in retail financial markets.
Using granular data on the contract terms and design details of more than 1.3 million credit card offers, we document how card issuers shroud unappealing, back-loaded features of an offer (e.g., high default APRs, late or over-limit fees) via the position of the information, font size, or complexity of the language used. More heavily shrouded offers that rely on back-loaded fees are also more likely to be offered to less-educated consumers. In addition, we document a novel interaction between behavioral screening and adverse selection: Using changes in state-level unemployment insurance (UI) as positive shocks to consumer creditworthiness, we show that issuers rely more on shrouded and back-loaded fees when UI increases, especially for less-educated consumers. Card issuers weigh short-term rent maximization against increased credit risk when targeting consumers’ behavioral biases.