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Analyzing the Role for a Consumer Financial Protection Agency

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  • Sharon Tennyson

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.

Suggested Citation

  • Sharon Tennyson, 2009. "Analyzing the Role for a Consumer Financial Protection Agency," NFI Policy Briefs 2009-PB-13, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2009-pb-13
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2009-PB-13_Tennyson.pdf
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    References listed on IDEAS

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    1. Erin Davis & Tara N. Rice, 2006. "Federal preemption of state bank regulation: a conference panel summary," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Sep.
    2. de Luna Martinez, Jose & Rose, Thomas A., 2003. "International survey of integrated financial sector supervision," Policy Research Working Paper Series 3096, The World Bank.
    3. Paul L. Joskow, 2009. "Deregulation: Where Do We Go from Here?," Books, American Enterprise Institute, number 51033, September.
    4. Tatom, John, 2009. "Responding to the 2007- 09 financial crisis: A new Consumer Financial Protection Agency?," MPRA Paper 16174, University Library of Munich, Germany.
    5. repec:aei:rpbook:24881 is not listed on IDEAS
    6. Scott Harrington, 2006. "Federal Chartering of Insurance Companies: Options and Alternatives for Transforming Insurance Regulation," NFI Policy Briefs 2006-PB-02, Indiana State University, Scott College of Business, Networks Financial Institute.
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    Cited by:

    1. John A. Tatom & Terrie Troxel, 2011. "A Report to the Federal Insurance Office," NFI Policy Briefs 2011-PB-07, Indiana State University, Scott College of Business, Networks Financial Institute.

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    More about this item

    Keywords

    banking; regulation; consumer protection; consumer financial protection agency;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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