Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Consumer Protection and Contingent Charges
Journal of Economic Literature
vol. 50,
no. 2, June 2012
(pp. 477–93)
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. (JEL D14, D18, G21, G28, L51)Citation
Armstrong, Mark, and John Vickers. 2012. "Consumer Protection and Contingent Charges." Journal of Economic Literature, 50 (2): 477–93. DOI: 10.1257/jel.50.2.477JEL Classification
- D14 Personal Finance
- D18 Consumer Protection
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- L51 Economics of Regulation