Data Regulation in Credit Markets

Uday Rajan Yan Xiong - Jan 26, 2025

Working Paper No.  00148-00

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 borrowers, including those who choose to share their data with the lender.


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technology adoption FinTech lending FinTech lending digital data manipulation regulation