Moving Forward: The Regulation of Consumer Financial Products: An Introductory Essay with a Case Study on Payday Lending

MF10-12: The recent financial crisis has led many to question how well businesses deliver consumer financial services and how well regulatory institutions address problems in consumer financial markets. In response, the Obama administration has proposed creating a new Consumer Financial Protection Agency. Other regulatory reforms have been advanced, and in some cases adopted, in recent years, at both the federal and state level. In this paper, we provide an overview of consumer financial markets, detailing the purposes they serve, the extent to which they suffer from market failures or other deficiencies, and how they are currently regulated. To illustrate our analytical framework, we present a case study on payday lending. We conclude with a series of observations on the limits of government intervention, suggestions about how to measure whether government intervention is successful and potentially fruitful lines of future research and data collection...