Consumer Law

It's Time for Another National Commission on Consumer Finance

By Jeff Sovern

Back in 1968, Congress created a bipartisan National Commission on Consumer Finance.  See Pub. L. No. 90-321. The Commission reported and went out of business.  It's probably fair to say that the Consumer Credit Protection Act would be a very different statute had the Commission not existed, though of course it's impossible to know. 

We need such a commission now.  The truth is there's a lot we don't understand about the subprime meltdown specifically and the consumer credit system generally.  We need to know more about what caused borrowers to take out these loans, and what caused lenders to make them.  We need to know more about whether disclosures can prevent this type of crisis, and if so, what kind of disclosures, and if not, what alternatives we have.  Plenty of solutions to the problem have been suggested, and we might solve the problem by happenstance, but then again, we might not.  A long careful look at the problem would be more likely to prevent recurrences than a rush to action in the heat of the moment.

It's clear that the marketplace, existing laws, and existing regulatory structures were not up to preventing the crisis.  In that light, it seems unwise to depend solely on the marketplace or existing regulatory structure to prevent the crisis from happening again. 

Of course appointing a commission is sometimes a substitute for taking action.  I'm not suggesting a commission should be used to create the illusion of action: the members of the commission should be chosen to represent all the various constituencies and should be committed to working hard on the business of the commission.  The commission should also have subpoena power and enough financing to conduct a serious investigation.  We need a body that can cut across jurisdictional lines while giving us an overview of what happened and what to do.

Such a commission should not confine its acts to investigating the subprime crisis.  It should also take a long look at other ills affecting the consumer credit system.  Can more be done about identity theft?  What about predatory credit cards?  Is our structure for regulating consumer credit transactions the best we can do?  I'm sure readers of this blog can come up with plenty of other things for the commission to explore.

We face probably the worst consumer credit crisis in decades. It's been forty years since we stepped back to see how we could do better.  Now it's time to do it again.

Full post as published by CL&P Blog on March 20, 2008 (boomark / email).