Congratulations, you're pre-approved! : an analysis of credit limit upselling letters

Consumer Action commissioned Dr Paul Harrison, Deakin Business School, Deakin University and Marta Massi, School of Marketing and Communication, Lumsa University (Rome), to study the psychological aspects of one form of credit marketing – unsolicited credit card limit-increase offers (UCCLIOs). The researchers studied 21 UCCLIO letters – 17 provided by consumers and four provided by banks – and applied theories developed from previous research in the fields of marketing, consumer behavior, behavioural economics and cognitive psychology, to describe likely ways in which UCCLIO’s influenced consumer behavior and decision making. The researchers make some recommendations from a behavioural perspective based on their findings, and Consumer Action proposes how these findings might be applied to consumer policy.

Social responsibility and credit availability

There has been a widespread increase in the use of consumer credit and therefore consumer indebtedness. Some of this increase has been within that segment of the population least able to afford debt of any kind – welfare recipients. This qualitative study demonstrates some interesting attitudes to debt, as well as differences in peoples’ perceptions of acceptable debt and their debt-management strategies. This study suggests that action is required by those responsible for the marketing of credit to this vulnerable group and government policymakers to provide a socially responsible approach to manage this societal concern.

Small amount credit contract reforms in Australia: household survey evidence & analysis

A review of small amount credit contract regulation in Australia began in 2015 as mandated under s 335A of the National Consumer Credit Protection Act 2009 (Cth). The review panel sought comprehensive data on industry and consumer characteristics and trends. To provide such evidence, consumer groups commissioned original empirical research using data collected from a longitudinal survey that monitors the financial position and attitudes of Australian households. This data on household use of small amount credit contract loans was extracted for the last decade, allowing detailed analysis of the historical patterns and developing trends. The data indicates that overall demand for small amount short duration credit is growing in Australia, the consumer base is broadening, and the predominant form of lending today is online. Deeper analysis highlights the varying motivations of borrower households and their different stages and levels of financial difficulty. It also confirms the socio-economic, employment, educational and financial disadvantages of most households using these loans and their vulnerability to adverse changes in personal circumstances and negative external shocks.

The market for software in the U.S.

The US market for software is investigated for the period 1964 to 2000, exploring the impact of price and non-price variables on software demand. and the impact of R&D and productivity on software supply. Software sales are positively associated with advertising, they are negatively affected by a rising consumer credit to GDP ratio. and are highly responsive to disposable income. Supply has been driven by productivity improvements.

No limits : exploring the psychology of unsolicited credit card limit increase offers

The issue of credit card debt has become an increasing concern in recent years. In Australia, for example, there is currently $42.5 billion worth of outstanding debt on credit cards, with $30 billion (over 70 per cent) bearing interest. Further, in 2001, Visa reported that 32 per cent of consumers had not paid their card off in the previous 12 months, which suggests that interest-bearing debt in Australia is held by approximately only 113 of credit card borrowers. An important element of credit card marketing is the use of psychological manipulations to encourage consumers to take-up credit. In this article, we examine the use of language and imagery in unsolicited credit card limit increase offers, and how these might influence consumers' decisions to increase their credit card limit. The analysis found that the use of terms that focused on the benefits of credit card use, such as "choice", "freedom", and "peace of mind" were used consistently to convince consumers to increase their credit card limit, whereas the use the of terms that could be considered more pragmatic and with direct reference to the nature of the product, such as "debt", "repayment" and "loan", were rarely used. Similarly, the use of colour, text changes, and images, were used which may have an influence over a consumer's ability to rationally consider whether the increase is appropriate for them. The paper concludes by recommending that government and representative bodies need to take into account the psychological manipulations used by credit card providers when developing consumer policy and codes of ethics.

Profiling for profit : a report on target marketing and profiling practices in the credit industry

This report examines how many businesses make significant investments to purchase and develop customer relationship management systems. Given such investments, information about these systems is not widely available, but some publicly available information gives indication of the extent, and purpose, of the use. Recognising that lenders use customer information and highly sophisticated systems to target their marketing strategies, is the first step towards ensuring that these practices are taken into account in the development of consumer policy and law reform. This research was funded by the consumer advisory panel of the Australian Securities and Investment Commission (ASIC).

Consumer issues in navigating health care services for type I diabetes

• Despite increasing interest in consumer awareness and participation in health care service delivery, there has been little exploration of consumer views in relation to services for people with type I diabetes. • The purpose of this qualitative exploratory study was to identify strategies people with type I diabetes used to access health services and the barriers they perceived in accessing the services they needed. • Data gathered in semi-structured interviews revealed that consumers experience significant barriers when navigating the health care system. • Three dominant themes were identified. They relate to access to specialist medical skill, to the transition from teenager to young adult and to pre-pregnancy and obstetric care. • Directions for change in service delivery and policy development are discussed.

Multiple visions or multiple aversions? Consumer representation, consultation and participation in maternity issues

This paper reviews the Commonwealth government's policy of 'purposeful reporting to consumers'. I argue that the notion of consumer participation is underdeveloped. Consumers' needs will not be fully met by confining consumer representation at the administrative level; that is, in assuming that consumer advocates may speak for other consumers of health care services. The partnership objective at the heart of 'purposeful reporting' may be addressed fully only when practitioners and providers recognise the reciprocal expertise of the consumer in defining their own health priorities. This would require a new model of knowledge, of ethics and of the clinical encounter. The problem is not one of information deficit but of contrasting views of knowledge.

A perspective on credit derivatives

This contribution offers an explanation of credit derivatives as a group of financial instruments having a common purpose being the managing of credit exposures, and thus credit or default risk. This paper explores the links between their economic and financial manifestations and the legal bases for their widespread application. To ensure an understanding of the purposes served by each of the main types of credit derivatives, a detailed scrutiny of individual instruments is undertaken. Issues relating law and economics to trading in this type of derivative are investigated, then pricing issues and empirical evidence are considered. A summary brings together the range of features bearing upon the effective development of a market in these financial instruments.

Scaling the volatility of credit spreads: evidence from Australian dollar eurobonds

The linear rescaling of the variance of an asset's return is used by many asset pricing models when an annualised risk coefficient is required. However, this approach may not be appropriate for time series, which are not independent and identically distributed (IID). This paper investigates the scaling relationships for daily credit spreads, from January 1995 to May 1998, between AAA-, AA-, and A-rated Australian dollar denominated Eurobonds with maturities of 2, 5, 7, and 10 years. The credit spread return all display similar scaling properties with the estimated standard deviation, based upon a scaling at the square root of time, significantly underestimating the actual level of risk predicted from a normal distribution. These results have implications for risk managers and trading of credit spread instruments.

CO2 credit or energy credit in emission trading?

Emission trading is a good concept and approach to tackle global warming. However, what “currency” or “credit” should be used in the trading has remained a debatable topic. This paper proposed an “Energy Credit” concept as an alternative to the “CO₂ credit” that is currently in place. From the thermodynamic point of view, the global warming problem is an “energy balance” problem. The energy credit concept is thought to be more thermodynamically correct and tackles the core of the global warming problem more directly. The Energy credit concept proposed can be defined as: the credit to offset the extra energy trapped/absorbed in the earth (and its atmosphere) due to the extra anthropogenic emission (or other activities) by a country or company. A couple of examples are given in the paper to demonstrate the concept of the Energy credit and its advantages over the CO₂ credit concept.

Endometriosis, an unknown entity: the consumer`s perspective

This paper reports the findings of a consumer-driven investigation conducted by the Centre for Clinical Nursing Research at Epworth Hospital in conjunction with the Endometriosis Association (Victoria, Australia) aimed at identifying the information and support needs of women experiencing endometriosis. Women's experiences of endometriosis and laparoscopy were examined. A questionnaire was designed to explore women's experiences of, and informational need for, the four categories of: diagnosis of endometriosis, endometriosis, laparoscopy and managing at home. A total of 465 women who had a positive diagnosis of endometriosis, including patients at the Epworth Endometriosis Centre and members of the Endometriosis Association, were included. The data were analysed in terms of frequency of responses and themes that arose from the research. Five main themes consistently emerged from the overall analysis of the questionnaire; these included: lack of communication, no-one listens, the emotional turmoil, expressions of gratitude to the Endometriosis Association and being young and helpless. Also identified was a lack of understanding of endometriosis and laparoscopy, on behalf of both the patient and the practitioner, which has led to communication of misinformation, extended physical pain and emotional distress. Based on these findings, recommendations were made for education strategies to be focused towards increasing awareness of endometriosis and for information to be disseminated using the preferred printed format and to be made available from gynaecologists, hospitals and schools. Through consumer participation, the information obtained in this study is of benefit to all women who come in contact with endometriosis by (a) validating women's experiences of endometriosis and (b) identifying women's needs in relation to the disease.