Analyzing the Role for a Consumer Financial Protection Agency

Sharon Tennyson

No 2009-PB-13, NFI Policy Briefs from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: In the debate over the proposed establishment of a new Consumer Financial Protection Agency, much attention has been given to discussion of whether consumers are irrational or incompetent and therefore need paternalistic regulators to look after them, and whether inadequate consumer protection regulation was a contributor to the financial crisis. Arguments over these questions are misplaced. Consumer protection regulation is commonplace in financial markets, and is essential even where consumers are fully rational and financial crises are distant. The potential role for a CFPA should first be examined based on consideration of the benefits and shortcomings of current consumer protection regulation, and how a dedicated consumer protection regulator would be likely to change things. Specific details of proposed legislation that affect the structure and authority of a CFPA should be evaluated separately rather than being used to determine whether such an agency is a good idea or a bad one. Consideration of the general principles for and against establishment of an independent CFPA may help to illuminate the strengths and weaknesses of specific legislative proposals.

Keywords: banking; regulation; consumer protection; consumer financial protection agency (search for similar items in EconPapers)
JEL-codes: G28 K23 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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