The Economics and Regulation of Financial Privacy: An International Comparison of Credit Reporting Systems (Contributions to Economics)

This Book Provides The First In-depth Analysis Of The Economics And Regulation Of Financial Privacy. It Is An International Comparison Of Credit Reporting Systems In The United States And In European Countries. On The Theoretical Level The Book Explains Competition In Information Markets, Especially In Markets For Goods Made Of Highly Personal And Sensitive Information. It Reviews The Microeconomics Of Information And Privacy And Discusses The Economic Incentives To Disclose Or To Conceal Information. The Book Also Focuses On The Institutions Of Credit Reporting, The History Of Credit Reporting Agencies And The Regulation Of Privacy And Credit Reporting On Both Sides Of The Atlantic As Well As Internationally. Finally, On The Empirical Level, It Reviews The Microeconomic And Potential Macroeconomic Effects Of Credit Reporting In The Credit Markets Of Countries Around The World.--book Jacket. Acknowledgments -- Introduction -- The Theory Of Information And Privacy -- The Institutions Of Credit Reporting -- Economic Effects Of Credit Reporting -- Lessons For Credit Reporting Regulation -- Conclusions. Nicola Jentzsch. Includes Bibliographical References. Contents......Page 8 1 Introduction......Page 12 2 The Theory of Information and Privacy......Page 17 2.1.1 Information Goods and Property Rights......Page 18 2.1.2 Network Economics......Page 23 2.1.3 Supply-side Characteristics......Page 29 2.1.4 Demand-side Characteristics......Page 33 2.2 Markets for Personal Information......Page 36 2.2.1 Intellectual Property Rights in Personal Data......Page 37 2.2.2 Negative Externalities in Information Markets......Page 40 2.2.3 Imperfect Appropriation of Personal Information......Page 45 2.2.4 Concentration of Information Power......Page 48 2.2.5 Versioning and "Purpose Creep"......Page 49 2.3.1 Information Economics......Page 53 2.3.2 The Microeconomics of Privacy......Page 63 2.3.3 Basic Interactions in Credit Reporting......Page 69 3 The Institutions of Credit Reporting......Page 84 3.1.1 International Overview......Page 85 3.1.2 United States......Page 87 3.1.3 European Overview......Page 105 3.1.4 Trans-national Reporting Schemes......Page 132 3.2.1 International Overview: Data Protection Laws......Page 133 3.2.2 The Regulatory Regime in the U.S.......Page 136 3.2.3 Regulatory Regimes in the Europe......Page 149 3.2.4 Comparison of U.S. and EU Approaches to Privacy......Page 167 3.2.5 International Initiatives......Page 170 4.1 Credit Scoring......Page 180 4.2.1 Data Protection and Credit Scoring......Page 188 4.2.2 International Differences in Credit Scoring......Page 204 4.2.3 Macroeconomic Evidence on Credit Reporting......Page 206 4.3.1 The Sample, the Variables and the Index......Page 215 4.3.2 Empirical Evidence on Credit Reporting Regulation......Page 225 4.4 Evidence on Information Inaccuracies......Page 240 4.4.1 What Do We Know about Mistakes in Credit Reports?......Page 242 4.4.2 Origin and Impact of Credit Report Inaccuracies......Page 255 5 Lessons for Credit Reporting Regulation......Page 260 6 Conclusions......Page 266 A......Page 270 B......Page 271 C......Page 274 D......Page 275 E......Page 276 F......Page 278 G......Page 279 H......Page 280 J......Page 281 K......Page 282 L......Page 283 M......Page 284 O......Page 285 R......Page 286 S......Page 287 U......Page 289 W......Page 291 Z......Page 292 Glossary of Credit Terms......Page 293 Appendix......Page 297 Physica-Verlag Heidelberg Contents 8 1 Introduction 12 2 The Theory of Information and Privacy 17 2.1 Competition in Information Markets 18 2.1.1 Information Goods and Property Rights 18 2.1.2 Network Economics 23 2.1.3 Supply-side Characteristics 29 2.1.4 Demand-side Characteristics 33 2.2 Markets for Personal Information 36 2.2.1 Intellectual Property Rights in Personal Data 37 2.2.2 Negative Externalities in Information Markets 40 2.2.3 Imperfect Appropriation of Personal Information 45 2.2.4 Concentration of Information Power 48 2.2.5 Versioning and "Purpose Creep" 49 2.3 Microeconomics of Information 53 2.3.1 Information Economics 53 2.3.2 The Microeconomics of Privacy 63 2.3.3 Basic Interactions in Credit Reporting 69 3 The Institutions of Credit Reporting 84 3.1 The History of Credit Reporting Agencies 85 3.1.1 International Overview 85 3.1.2 United States 87 3.1.3 European Overview 105 3.1.4 Trans-national Reporting Schemes 132 3.2 The Regulation of Credit Reporting 133 3.2.1 International Overview: Data Protection Laws 133 3.2.2 The Regulatory Regime in the U.S. 136 3.2.3 Regulatory Regimes in the Europe 149 3.2.4 Comparison of U.S. and EU Approaches to Privacy 167 3.2.5 International Initiatives 170 4 Economic Effects of Credit Reporting 180 4.1 Credit Scoring 180 4.2 Micro- and Macroeconomic Evidence on Data Protection 188 4.2.1 Data Protection and Credit Scoring 188 4.2.2 International Differences in Credit Scoring 204 4.2.3 Macroeconomic Evidence on Credit Reporting 206 4.3 Estimating the Effects of Data Protection 215 4.3.1 The Sample, the Variables and the Index 215 4.3.2 Empirical Evidence on Credit Reporting Regulation 225 4.4 Evidence on Information Inaccuracies 240 4.4.1 What Do We Know about Mistakes in Credit Reports? 242 4.4.2 Origin and Impact of Credit Report Inaccuracies 255 5 Lessons for Credit Reporting Regulation 260 6 Conclusions 266 References 270 A 270 B 271 C 274 D 275 E 276 F 278 G 279 H 280 I 281 J 281 K 282 L 283 M 284 O 285 P 286 R 286 S 287 T 289 U 289 V 291 W 291 Y 292 Z 292 Glossary of Credit Terms 293 Appendix 297 ISBN-13:,9783790817379 Markets would not exist without the exchange of information. Information exchange is the initial and most basic phase of every economic transaction, without it, market participants would not trust each other and no trade would take place. This holds for all transactions across all markets at any time. However, it is of special importance for financial markets that are known for their dependence on information. In household credit markets, the disclosure of personal information is a precondition for any credit c- tract. This book is the first comprehensive analysis of the economics and regulation of financial privacy with an emphasis on credit reporting. Credit reporting agencies collect, analyze and distribute billions of information items on millions of borrowers in modern credit societies. They provide the fundamentally vital informational structure in credit markets. Their networks span across financial services providers, retailers, insurance firms, telecommunication providers as well as public utility providers and in some countries even transportation companies. Employers and landlords are also increasingly using credit data for their professional decisions. Therefore, any book on credit reporting is naturally a book about financial privacy or the economics of privacy in general. The impetus for my study of privacy was an article by Joe Stiglitz and Michael Rothschild published in 1997. In this article, the authors discuss possible efficiency gains in - surance markets through the disclosure of the human genetic code. This book provides the first in-depth analysis of the topic, offering an international comparison of credit reporting systems. Coverage includes competition in information markets, the microeconomics of information and privacy, and economic incentives to disclose or to conceal information. The book examines the history of credit reporting agencies and the regulation of privacy and credit reporting around the world. Finally, it surveys the effects of credit reporting in credit markets worldwide. Provides an analysis of the economics and regulation of financial privacy. This book explains competition in information markets, especially in markets for goods made of highly personal and sensitive information. It reviews the microeconomics of information and privacy and discusses the economic incentives to disclose or to conceal information. "Author Nicola Jentzsch provides an analysis of the economics and regulation of financial privacy and a comparative overview of credit reporting system in the US and the 27 member states of the European Union."--Jacket