The Economics and Regulation of Financial Privacy: An International Comparison of Credit Reporting Systems 2006

By: Nicola Jentzsch


Contents
1 Introduction 1
2 The Theory of Information and Privacy 7
2.1 Competition in Information Markets 8
2.1.1 Information Goods and Property Rights 8
2.1.2 Network Economics 13
2.1.3 Supply-side Characteristics 19
2.1.4 Demand-side Characteristics 23
2.2 Markets for Personal Information 26
2.2.1 Intellectual Property Rights in Personal Data 27
2.2.2 Negative Externalities in Information Markets 30
2.2.3 Imperfect Appropriation of Personal Information 35
2.2.4 Concentration of Information Power 38
2.2.5 Versioning and “Purpose Creep” 39
2.3 Microeconomics of Information 43
2.3.1 Information Economics 43
2.3.2 The Microeconomics of Privacy 53
2.3.3 Basic Interactions in Credit Reporting 59
3 The Institutions of Credit Reporting 75
3.1 The History of Credit Reporting Agencies 76
3.1.1 International Overview 76
3.1.2 United States 78
3.1.3 European Overview 96
3.1.4 Trans-national Reporting Schemes 123
3.2 The Regulation of Credit Reporting 124
3.2.1 International Overview: Data Protection Laws 124
3.2.2 The Regulatory Regime in the U.S. 127
3.2.3 Regulatory Regimes in the Europe 140
3.2.4 Comparison of U.S. and EU Approaches to Privacy 158
3.2.5 International Initiatives 161
4 Economic Effects of Credit Reporting 171
4.1 Credit Scoring 171
4.2 Micro- and Macroeconomic Evidence on Data Protection 179
4.2.1 Data Protection and Credit Scoring 179
4.2.2 International Differences in Credit Scoring 195
4.2.3 Macroeconomic Evidence on Credit Reporting 197
4.3 Estimating the Effects of Data Protection 206
4.3.1 The Sample, the Variables and the Index 206
4.3.2 Empirical Evidence on Credit Reporting Regulation 216
4.4 Evidence on Information Inaccuracies 231
4.4.1 What Do We Know about Mistakes in Credit Reports? 233
4.4.2 Origin and Impact of Credit Report Inaccuracies 246
5 Lessons for Credit Reporting Regulation 251
6 Conclusions 257
References 261
Glossary of Credit Terms 285
Appendix 289