Financial innovations, spurred by the growth of information tech-nology, have transformed the consumer lending industry. Today lenders have unfettered access to a wider spectrum of borrowers and are better able to assess the likelihood that these borrowers will repay the debt they incur. Consequently, the level of consumer household debt has risen dramatically in the past three decades, and will continue to rise, which will lead naturally to an increase in bankruptcy filings. Although our initial intuition tells us that bankruptcies are bad, the author advances the idea that this development is inevitable and that instead of focusing on amending bankruptcy laws, reformers should ask instead whether regulations can help consumers make better borrowing decisions.
The full text of this Symposium is available to download as a PDF.