Unsecured Credit Supply, Credit Cycles, and Regulation

This paper explores the dynamics of unsecured credit supply over the recent credit cycle and around the passage of the CARD Act. We examine a unique data set of over 200,000 credit card mail solicitations to a representative sample of households and introduce credit card offers as a direct, informative measure of supply of such credit. Contrasting personal credit card offer dynamics before and after the passage of the CARD Act with those of personal loans, auto loans, and corporate credit cards, we find that lenders reduced credit supply of personal credit cards to nonprime borrowers in response to the CARD Act. Our analysis highlights the importance of separately examining supply and demand responses to assess the unintended consequences of regulation.