When FinTech Meets Privacy: The Consequence of Personal Information Misuse in Debt Collection

We examine the consequence of an intrusive debt-collection tactic, whereby delinquent borrowers’ social circles are targeted. Using the fact that some loans are not subject to this tactic due to debt collectors’ excessive workloads to develop our identification strategy, we find that this debt-collection tactic increases the targeted borrowers’ default rate by up to almost 30%. Borrowers with higher reputation, trust level, or privacy awareness responded more strongly. These results are consistent with the negative reciprocity interpretation: angered borrowers retaliate by defaulting deliberately. Borrowers’ online-consumption data show no evidence that their defaults are related to declined ability to repay.