Despite Naysayers, Consumer Finance Panelists are Uniquely Qualified to Tackle Barriers to Financial Inclusion

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Last week, the Consumer Financial Protection Bureau (CFPB) announced the membership of the newly created Taskforce on Federal Consumer Financial Law. Members include Professor of Law at George Mason University and CEI Board Member Todd Zywicki, who will serve as chair, as well as Dr. Thomas Durkin, Dr. J. Howard Beales III, and L. Jean Noonan. The task force will work to “harmonize and modernize federal consumer financial laws” and report to the CFPB director with its recommendations on how to improve and strengthen the legal and regulatory regime around consumer finance.

As evidenced below, each member has a great deal of professional experience distinctly suitable for a seat on the taskforce:

  • Todd J. Zywicki – Professor of Law at George Mason University (GMU) Antonin Scalia Law School, Senior Fellow of the Cato Institute, and former Executive Director of the GMU Law and Economics Center;
  • Dr. Thomas Durkin – Senior Economist (Retired) at the Federal Reserve Board;
  • Dr. J. Howard Beales III – former Professor of Strategic Management and Public Policy at the George Washington University and former Director of the Bureau of Consumer Protection at the Federal Trade Commission;
  • L. Jean Noonan – Partner at Hudson Cook, former General Counsel at the Farm Credit Administration, and former Associate Director of the Bureau of Consumer Protection’s Credit Practice at the Federal Trade Commission.

Upon the announcement, my colleague John Berlau and I applauded the CFPB’s decision to choose such distinguished scholars to serve on this important and influential panel.

However, it seems that not everyone in the consumer finance space had similar praise. Take for example Ed Mierzwinski, Senior Director of the Federal Consumer Program at the U.S. Public Interest Research Group, who this weekend called the task force a “farce” that will spin “in the industry’s orbit.” In his argument, Mierzwinski parrots the same misunderstanding advanced in an October column by David Lazarus of the Los Angeles Times, which I previously disputed here. Like Lazarus, Mierzwinksi feels that the CFPB’s claim that the task force was inspired by a 1972 report published by the National Commission on Consumer Finance is nonsense. In their respective analyses, both assert that the report was pivotal in generating substantial and new regulation of consumer credit markets, seamlessly ignoring the overwhelming deregulatory nature of the report.

Besides this, it’s laughable that Mierzwinski would even insinuate that such an initiative can be considered a “farce” when considering the Obama-era CFPB failed to undertake any such efforts aimed at truly helping consumers and instead opted to spend $215 million of taxpayer dollars on renovations of the building that included a two-story waterfall and a sunken garden. It’s even more absurd to make the point that the task force will spin “in the industry’s orbit,” as these scholars have often gone up against industry interests and advocated for nuanced well-tailored regulation. For instance, Zywicki has often discussed the power of FinTech and how these new firms can provide financial products to those outside of the banking system—a view not well-liked by traditional banking firms, which see these upstart firms as eating into their market share.  Zywicki has further written that the CFPB can be a force for good and can help these firms prosper by eliminating some of the rent-seeking type of regulation pushed for by big banks.

Also take “Market-Reinforcing versus Market-Replacing Consumer Finance Regulation,” which  Zywicki authored in 2017, where he defends consumers and makes the case for appropriate right-sized finance regulation. Zywicki notes:

A modern approach to consumer credit regulation should recognize and embrace the dynamic and innovative nature of consumer credit and payments. Mobile phone technology offers the potential to empower consumers to gain access to new information and make better decisions about the products that they choose. The reimposition of old-style command-and-control regulation, by contrast, threatens to stifle this innovation, competition, and flexibility.

Contrary to the boogeymanning put forward by Mierzwinksi, Zywicki and his colleagues’ work on the task force will go a long way in freeing consumers from the archaic and burdensome regulations that disrupt their everyday lives.