Consumer Protection

Consumer Protection


Todd Zywicki | Sep 29, 2015
A new paper for the Mercatus Center at George Mason University reviews the law and economics of consumer debt collection and its regulation and concludes that the CFPB should consider all the potential consequences of new regulation—both intended and unintended—to ensure that it will benefit consumers.
Jason Scott Johnston , Todd Zywicki | Aug 03, 2015
In a new study for the Mercatus Center at George Mason University, law professors Jason Scott Johnston and Todd Zywicki provide an overview and critique of the CFPB’s report. The study criticizes the report using primarily evidence supplied by the report itself. The CFPB’s findings show that arbitration is relatively fair and successful at resolving a range of disputes between consumers and providers of consumer financial products, and that regulatory efforts to limit the use of arbitration will likely leave consumers worse off.
Adam C. Smith, Todd Zywicki | Mar 11, 2014
The Consumer Financial Protection Bureau (CFPB) is one of the most powerful and least accountable regulatory agencies in American history. Immune from budgetary oversight by Congress and headed by a single director whom the president cannot remove except under special circumstances, the agency wields unconstrained, vaguely defined powers to regulate virtually every consumer and small business credit product in America (Zywicki 2013a). In part, the CFPB has justified its ongoing intervention into financial credit markets based on a prior belief in the inability of consumers to competently weigh their decisions. This belief is founded on research conducted in the area of behavioral economics, which shows that people are prone to a variety of errors in their decision-making.
James K. Glassman, J. W. Verret | Apr 16, 2013
A rule enacted by the Securities and Exchange Commission in 2003 required institutions to adopt and disclose policies for proxy voting that were intended to minimize conflicts between the institutions’ interests and those of their shareholders. An SEC staff interpretation of that rule led to a result almost the opposite of the ruling’s intent. Institutions could easily protect themselves from legal liability by shifting responsibility to proxy advisory firms, which acquired increasing power over corporate governance, to the detriment of shareholders.
Todd Zywicki | Jan 15, 2013
This paper describes the current economic and regulatory landscape for prepaid cards. The market appears to be robustly competitive, as recent years have seen declining costs and increasing functionality as well as entry of major players such as American Express and several large banks. Nor is there any evidence that consumers systematically err in the cards that they choose. Absent a demonstrable competitive market failure or systematic consumer abuse, prescriptive regulation of the terms and substance of prepaid cards would likely have unintended consequences that would exceed the benefits to consumers. On the other hand, there are some regulations that might be enacted that could promote competition and consumer welfare in this rapidly evolving market.
Todd Zywicki, Robert Sarvis | Jan 14, 2013
Government regulators proposing restrictions on specific forms of consumer credit all too often ignore the reality of how and why consumers use credit. They also ignore lenders’ legitimate reasons for pricing their services as they do; consumers’ legitimate reasons for choosing the financing options they do; the risks consumers face when credit offerings are made unavailable to them; and the many consumers who use the particular forms of consumer credit responsibly and effectively.

Testimony & Comments

Expert Commentary

Nov 18, 2015

While we can be confident that new regulations for the debt collection industry are on the way, it's not yet clear whether those regulations will help or harm consumers. The result is largely dependent upon the Consumer Financial Protection Bureau (CFPB), which has the opportunity to either help facilitate open, constructive communication between consumers and debt collection firms, or to saddle the industry and consumers with hasty regulations that result in unintended consequences.
Oct 22, 2015

Combating bad ideas would be much easier if they were all backed by ill intent. More often than not, however, the opposite is true, and the worst government policies are enacted with the intention to help. Such is apparently the case with the aggressive campaign by the Consumer Financial Protection Bureau to eliminate the payday lending industry.
By Thomas W. Miller, Jr., Thomas A. Durkin |
Oct 13, 2015

Although life insurance agents and lenders provide socially important products, few people get lively when thinking about them. Fewer still get excited about lenders who also sell life insurance on loans. While few people have even heard of an important insurance product known as credit insurance, many borrowers rely on this product for peace of mind. What is credit insurance? Borrowers sometimes worry that they will not be able to pay back their loan due to unforeseen events. The market, of course, provides a way to calm these anxious borrowers by allowing them to add a product to their loan: credit insurance.
Apr 07, 2015

Last week, the Wall Street Journal reported that bank regulators are spending lots of quality time with bank boards of directors. Bank supervisors engage in extended chats with independent directors, drop in on board meetings, and otherwise size up bank boards. As John Carney pointed out in a follow-up piece this week, the result of these activities is that shareholders are no longer boards' priority.
Mar 25, 2015

The Consumer Financial Protection Bureau's decision to allow consumers to post narrative descriptions of their experiences with financial institutions is not surprising, however, publishing unverified consumer narratives is not helpful to consumers. When consumers are permitted to speak with their feet in the marketplace, their voices have much greater impact than the stories they tell the CFPB.
Jan 15, 2014

Mr. Cordray told The Daily Show audience that the bureau is now turning its attention to the bank practice of "confusopoly"-subjecting consumers to lots of hefty, complex forms in order to make it tough for them to determine what price they will be paying. A lot of small bankers are suffering from CFPB confusopoly, in which the agency promulgates so many pages of new rules, enforcement actions, and guidance that small banks with thin compliance staffs cannot figure out which rules apply to them, let alone what they require. As one bank in our survey noted, "[a]ll the uncertainty and changing definitions, etc., related to qualified mortgages, mortgage banking requirements and so forth has made the business of serving customers by helping them become homeowners much more difficult, cumbersome, and time-consuming." While well-intentioned, and careful lenders busy themselves with "bringing things up to snuff" under the bureau's fuzzy standards, consumers whose financing needs are not getting met might be wondering which consumers Mr. Cordray's agency is protecting.




| May 02, 2012
On WOR Radio's The John Gambling Show, J.W. Verret explains that, despite rhetoric about helping the little guy, Dodd-Frank actually benefits the wealthiest Americans.

Recent Events

The Mercatus Center at George Mason University continues its “Future of Finance” series of events with a timely event focused on the regulation of consumer credit products.

Media Clippings

Todd Zywicki | Oct 20, 2014
This excerpt originally appeared in the Washington Examiner.
Todd Zywicki | Jul 24, 2013
The commission’s “decision today is an unqualified disaster for consumers,” said Todd J. Zywicki, a professor at George Mason University School of Law.
Veronique de Rugy | Apr 26, 2012
Veronique de Rugy calls out cronyists.
Steven Horwitz | Apr 23, 2012
Steven Horowitz applies the parable of the broken traffic lights to the mortgage lending crisis.
| Mar 14, 2012
Antony Sanders says the results of the financial stress tests are a lot less scary than they seem.
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