Lecture：The Pricing Strategies and the Default Patterns of Unsecured Consumer Loan

Time：12:00-13:00, 2^nd July 2019

Venue：Room 505, Tonji Building A

Speaker：Lei LU（Bryce Douglas Chair Professor in Finance, University of Manitoba）

Abstract：

This paper explores the dynamic pricing strategies of an unsecured consumer loan issuer and the default patterns of the loans. We examine a unique proprietary data set of about 3 million unsecured consumer loans from a representative sample of households provided by a Business-to-Consumer (B2C) online retailer in China. First, the likelihood of a customer being solicited by the loan issuer increases monotonically in credit worthiness and age. Second, the pricing strategies of the loan issuer demonstrate a trade-off across the borrowers. The unsecured consumer loan lender reduces the credit supply for the non-solicited more risky borrowers, and charges less for these borrowers. After the passage of the China Banking Regulatory Commission (CBRC) Act (the CBRC Act), this trade-off is exacerbated. Third, the consumer loan default probability, arrears amount, and the time in arrears are lower for solicited customers, higher for more risky borrowers, higher for younger borrowers, and higher after the passage of the Act.