Consumer Protection and Contingent Charges
Abstract:Contingent charges for financial services, such as fees for unauthorized overdrafts, are often controversial. We study the economics of contingent charges in a stylized setting with naive and sophisticated consumers. We contrast situations where the naive benefit from the presence of sophisticated consumers with situations where competition works to subsidize the sophisticated at the expense of the naive, arguably unfairly. The case for regulatory intervention in these situations depends in good part, but not only, on the weight placed on distributional concerns. The economic and legal issues at stake are well illustrated by a case on bank charges recently decided by the U.K. Supreme Court.
Document Type: Research Article
Publication date: 2012-06-01
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- The Journal of Economic Literature (JEL) began publication in 1969 under the auspices of the American Economic Association with quarterly issues appearing in March, June, September, and December. JEL contains survey and review articles, book reviews, an annotated bibliography of newly published books, and a list of current dissertations in North American universities.
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