Work

Credit counseling: a substitute for consumer financial literacy?

Year: 2015

Type: article

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.

Source: Journal of Pensions Economics and Finance

DOI: 10.1017/s1474747215000219

Authors: RICHARD DISNEY, JOHN GATHERGOOD, JÖRG WEBER

Institutions: Institute for Fiscal Studies, University of Sussex, University College London, University of Nottingham

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,550

Funder: Economic and Social Research Council