Area: Finance

Committee Members: Dr. Sudheer Chava (Chair), Dr. Suzanne Lee, Dr. Manasa Gopal, Dr. Nikhil Paradkar (University of Georgia)

Title: Essays on Financial Intermediaries and Household Finance: Auto Lending and Credit Unions

Dissertation Overview:

Essay 1: A Different Kind of Drive? Indirect Lending and the Transformation of Consumer Credit Markets

Auto repossessions in the United States have surged to levels last seen in the Great Recession. While standard explanations emphasize borrower credit risk, this paper highlights the role of the origination channel. We exploit the adoption of indirect (dealer-originated) lending programs across credit unions as an empirical setting to identify how distancing lenders from borrowers alters ex-post default resolution. Combining monthly credit bureau data with NCUA Call Reports from 2005 to 2024, we use the staggered adoption of indirect lending to trace how it changes lender behavior. At the lender level, indirect lending adoption significantly increases institution size and auto loan volume, while reducing liquidity and net worth ratios, reflecting a shift toward a more aggressive, growth-oriented financial model. From loan-level data, we show that this growth does not stem from an observably riskier borrower pool. Instead, the indirect channel fundamentally alters institutional forbearance. Conditional on 60 days past due, loans originated post-adoption are 2.6 percentage points (20%) more likely to result in repossession compared to pre-adoption cohorts within the same institution. This 'transactional penalty' is concentrated among lower-income and subprime borrowers yet weakens with the length and breadth of the borrower’s prior relationship with the credit union. The results suggest that rising repossessions reflect not only who borrows but how far lenders stand from the borrowers they serve.

Essay 2: Funding Constraints and the Deposits Channel of Monetary Policy: Evidence from Credit Unions

The standard deposits channel of monetary policy predicts that banks widen deposit spreads when policy rates rise and permit deposit outflows, as wholesale funding partly replaces them. While recent work attributes variation in this channel to clientele sensitivity and financial technology (money market funds, online banks, and digital platforms), we show that an intermediary's own funding constraints also shape it. Credit unions combine a branch-based deposit franchise with no access to external equity and limited access to wholesale funding, making them a natural laboratory for funding constraints that bind, to varying degrees, across all depository institutions. Despite their sleepy, branch-based retail clientele, credit unions pass through substantially more than banks on time deposits (share certificates). Members partially rotated into certificates rather than leaving, and total deposits continued to grow through the 2022–2023 tightening cycle while commercial banks lost $1 trillion. The higher marginal cost of deposits passes through to the asset side: credit union auto loan rates rise 17–23 basis points more than bank rates per 100 basis points of tightening. Within credit unions, deposit passthrough is stronger where alternative funding access is tightest, consistent with funding constraints as the mechanism.

Essay 3: Who Holds the Key? Lender Heterogeneity in Auto Loan Repossession

Auto repossession is the most common collateral seizure in U.S. household finance, exceeding 3 million a year, more than eviction filings, consumer bankruptcies, or mortgage foreclosures, yet the lender's decision to seize remains essentially undocumented. I study how that decision varies with who holds the loan, using a monthly, lender-identified credit bureau panel from 2010 to 2025 that tracks auto loan payment history, the decision to repossess, and how each repossession is resolved. First, in reduced form, I show that lenders differ sharply in their willingness to seize conditional on the same distress: credit unions repossess at a much lower hazard than other lenders, while nonbank lenders seize fastest. Using state-level repossession statutes and staggered state COVID moratoria, I test whether lender types respond differently to the same restriction, both when a ban binds and when it lifts. Second, to recover the primitives governing lender type heterogeneity, I estimate a dynamic model of the repossession decision, separately by lender type, decomposing these differences into lender objectives, securitization and origination channels.