Consumer financial protection: advantages, dangers and should it be a new agency?

Author: Martin Neil Baily


Widespread consumer credit defaults help make it clear that improved consumer protection is needed. Had there been better protection prior to the financial crisis this would have ameliorated the severity of the crisis and might even have forestalled it.

However, there are dangers in a CFPA, dangers of over regulation and of stifling innovation. Proposals for blanket prohibitions and for compulsory provision of plain vanilla products are probably a step too far. The emphasis should be on improved transparency and on solving the market failure of inadequate information.

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