Behavioural Law and Economics: Regulatory Reform of Consumer Credit and Consumer Financial Services

Abstract

This paper examines the influence of behavioural research on economic policy-making, as it relates to the regulation of consumer credit and consumer financial services. Using the examples of credit cards in the USA and Australia, and retirement savings infrastructure in the USA, New Zealand and Australia, we investigate the impact of ‘nudging’ on regulation in these areas, and the degree to which such policies are capable of substantive change without the support of mandatory measures and other forms of targeted regulation. The authors conclude that nudging, alone, is not sufficient to achieve effective regulatory reform, and that other policies recommended by behavioural economics, such as mandatory measures and other forms of targeted regulation, are also required to achieve durable change in consumer behaviour. In light of this conclusion, the authors suggest that ‘nudging’ is best viewed as a regulatory supplement, or one of a range of regulatory tools, and that more attention should be focused on the...