We study a credit market in which lending decisions depend on a borrower's digital profile, and the borrower can manipulate their digital profile. When the borrower observes the amount of data collected by the lender, manipulation increases as the lender acquires more data. Such manipulation worsens both the quality of the lender's data and its lending decisions. As a result, the lender endogenously limits its own data coverage. Disclosure regulations allow the lender to credibly commit to limiting its data coverage, and privacy regulations can benefit all borrower

Visa and Mastercard are among the most profitable companies in the world. Despite stricter regulatory scrutiny, their profit margins have only been steadily increasing over the years. Many models on payment competition focus on the interchange fee, while this paper shows that fixed card rebates to card issuers could also play an important role. We have adapted existing platform models to a competitive market for payment cards with increasing homogeneous transaction benefits combined with heterogeneous card benefits. It is shown how pricing distortions evolve as the card market saturates towards full market coverage. In a monopolistic market, profit maximizing card rebates are too low compared to the socially optimal level. For low transaction benefits, this is especially the case on the side that shows more homogeneity and has higher card benefits. For higher transaction benefits, the opposite is true. The effects of card network competition are determined by the "homing structure''. Pricing distortions are highest on the side that uses more than one card network.

This paper establishes that high income-volatility, minority dominant zip codes were disproportionately exposed to the expansion of credit following the BAPCPA 2005 policy change, which granted preferred bankruptcy status to mortgage backed collateral in the sale and repurchase market. This change only affected the collateral value of risky private-label mortgages, not of agency mortgages, and caused the disproportionate expansion of alternative mortgage products among high-income-variability minority-dominant zip codes. These alternative products featured artificially low initial payments that would reset to much higher payments, exposing vulnerable borrowers to synchronized mortgage payment shocks and higher levels of default during the Global Financial Crisis. A model of mortgage lending illustrates that an increase in collateral value decreases lenders’ cost of capital, leading dealers to lower the price they charge to borrowers. If the price falls below the borrowers’ reservation price, lending expands in the affected market, consistent with a demand stimulation mechanism of BAPCPA. This paper provides insights on how to increase stability of private-label mortgages, which substituted for FHA/VA mortgages in the 2000s, if they increase again in volume, as they did in 2019.