Reports from Borrowers and Lenders Show Differences in Credit Card, Student ...

Category: Small Business Borrowing Published: Saturday, 29 August 2015 Written by Admin

Credit card and student loan debt reported by borrowers and lenders in two surveys by the Federal Reserve Bank of New York varies significantly, according to a new study released by the Fed this week.

The authors of the study, "Do We Know What We Owe? Consumer Debt as Reported by Borrowers and Lenders," Meta Brown, Andrew Haughwout, Donghoon Lee and Wilbert van der Klauuw, compared reports on debt from borrowers in the Survey of Consumer Finances (SCF) and lender-reported figures in the Consumer Credit Panel (CCP) survey.

The researchers find that in the majority of disaggregated debt categories and borrower characteristics, with the exceptions being credit card debt and student loan debt, debt levels reported in the SCF and CCP are similar, according to a Fed news release on the consumer debt study.

Aggregate credit card debt reported by borrowers in the SCF is estimated to be 37 to 40 percent lower than what is implied by lenders' reports in the CCP, according to the Fed.

"Generous accounting for small business borrowing and other factors still leaves a 37 percent gap between SCF and CCP mean household credit card balances. The difference in reported credit card use between the SCF and the CCP is significantly and substantially larger for households with three or more adults than for single and two-adult households. This may be attributable in part to household survey respondents' greater knowledge of their own debt than of their household members' debt, and it may offer a partial explanation for the remaining 37 percent gap," the Fed reports.

According to the report, the differences in credit card use reported in the two surveys may be explained by the fact that unlike households represented in the CCP, SCF households may not have a member with a credit report. Additionally, SCF households may not report business uses of personal credit cards that still appear on households' combined credit reports, according to the Fed. "We make generous allowances for these explanations, and find that a 37-percentage-point gap in aggregate credit card debt remains."

Debt from mortgages, home equity loans and vehicle loans are at similar levels and similar age patterns in both surveys, according to the Fed.

The New York Fed conducts the SCF every three years by surveying US households on their assets and liabilities, while the CCP is based on data supplied by the Equifax credit reporting agency.

Student Debt

The aggregate student debt balances reported by borrowers in the SCF are 25 percent lower than those reported in the CCP, according to the Fed.

"The widening difference in student debt estimates has various potential explanations," according to the Fed's report. "The difference in the populations represented by the two sources as a result of the presence or absence of credit reports should play little role, because most student debts generate reports ... the SCF's use of household-level financial reporting by a single respondent may lead to undercounting of student debts held by grown children or other household members that are not fully known to the respondent. And, of course, respondents may not be fully aware of their own current debt balances."

The Fed reports that a combination of these factors could produce the gap in student loan debt in the two surveys.


The Fed researchers did find consistency in bankruptcy reports between the SCF and CCP.

Three-year bankruptcy rates reported in the SCF--2.90, 2.91, 2.25, and 2.70 in 2001, 2004, 2007, and 2010, respectively--are very similar to the 24-month household bankruptcy rates in the CCP of 2.70, 2.98, 1.97, and 2.65, the Fed reports.

"In contrast to the credit card debt mismatch, bankruptcy history is reported comparably in the borrower and lender sources, indicating that not all stigmatized consumer behaviors are underreported," according to the Fed.  "Whether this indicates that something other than stigma, such as ignorance of debt positions, underlies the credit card debt discrepancy, or that consumers feel differently about reporting major life events, such as bankruptcy, in contrast to more marginal financial position changes, remains an open question."

The Fed researchers continue to seek opportunities to observe comparable consumer self-reports and lender-reported data.

"Until such data are available, however, the detailed comparisons permitted by the rich SCF and CCP data provide our most complete picture of the reliability of debt reporting. Finally, while existing survey data provide limited opportunity to separate unwillingness to report financial information from lack of knowledge of financial information, experimental data might permit a distinction between knowledge of debt and willingness to report debt," the researchers conclude in their report.

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