Consumer Financial Protection Research Articles

Democracy Declined: The Failed Politics of Consumer Financial Protection. By Mallory E. SoRelle. Chicago: University of Chicago Press, 2020. 248p. $97.50 cloth, $32.50 paper.

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Financial capability and wellbeing of vulnerable consumers

AbstractConsumer financial capability can be defined variously by different researchers. In this study, financial capability is assumed to have three components, financial knowledge, financial behavior, and financial skills. This study examines relative contributions of financial capability components to financial wellbeing among vulnerable consumers. With data from the National Financial Wellbeing Survey commissioned by the Consumer Financial Protection Bureau (CFPB), results show that among financial capability components, financial behavior contributes the most to financial wellbeing of the whole sample, followed by financial skill and financial knowledge. In addition, group differences surface when subsamples in terms of age, poverty status, confidence, and fraud victim status are examined. Results suggest that for low‐income consumers, encouraging them to engage in desirable financial behaviors is more important than teaching them financial knowledge and skills. Findings have implications for financial educators, practitioners, and policymakers to help them recognize the proper financial education or program to be delivered based on consumer vulnerability and components of financial capability.

The Link Between Adverse Childhood Experiences and Financial Security in Adulthood.

This study provides an evidence-based link between adverse childhood experiences (ACEs) and adult financial wellbeing. Drawing on a comprehensive financial wellbeing framework that was developed by the Consumer Financial Protection Bureau, we analyze data from the Behavioral Risk Factor Surveillance System, a survey designed primarily to measure health behaviors and outcomes, but which also asks about financial wellbeing aspects such as food and housing security. We use ordered probit analysis to investigate how respondents’ self-reported levels of food security and housing security are influenced by demographics that include remembered ACEs and find that, at various income levels, financial stress in adulthood is related to childhood trauma. This interdisciplinary approach to studying financial outcomes extends work in public health and psychology that establishes a link between ACEs and adult physical and mental health measures. The finding is timely as policy makers craft responses to global public health, financial, and other shocks. Recognizing this link between ACEs and adult financial wellbeing provides additional evidence that educators, therapists, social workers, and other professionals should collaborate and develop integrated practices to prevent or reduce ACEs and promote resilience.

Consumer Protection for Financial Inclusion in Low- and Middle-Income Countries: Bridging Regulator and Academic Perspectives

Markets for consumer financial services are growing rapidly in low- and middle-income countries and are being transformed by digital technologies and platforms. With growth and change come concerns about protecting consumers from firm exploitation due to imperfect information and contracting as well as from their own decision-making limitations. We seek to bridge regulator and academic perspectives on these underlying sources of harm and five potential problems that can result: high and hidden prices, overindebtedness, postcontract exploitation, fraud, and discrimination. These potential problems span product markets old and new and could impact micro- and macroeconomies alike. Yet there is little consensus on how to define, diagnose, or treat such problems. Evidence-based consumer financial protection will require substantial advances in theory and especially empirics, and we outline key areas for future research.

금융소비자보호법상 설명의무에 관한 연구

2021년 3월 5일 시행된 금융소비자보호법은 종전 자본시장법상 미비했던 설명의무 제도의 실효성 확보를 위해 필요한 여러 구체적 규제사항을 신설하였다. 특히 금융소비자보호법에서 설명의무의 실효성 확보를 위해 설명 대상인 금융상품의 중요한 사항에 관한 구체적 기준을 마련하고, 손해배상청구 시 입증책임의 전환과 함께 위법계약해지권을 도입하여 위반 시 제반 구제수단을 부여하며, 징벌적 과징금제도를 통해 금융 회사에 대한 강력한 제재를 예정함으로써 금융소비자 보호를 한층 강화한 것은 종전 법률에 비해 진일보한 규제정책이라고 평가할 수 있다. 그럼에도 불구하고 일부 규정의 경우에는 여전히 개선의 여지가 있는 부분이 있어 입법론적인 보완이 요구된다. 본고에서는 금융소비자보호법상 설명의무의 모델이 되었던 자본시장법상 설명의무와 금융소비자보호법상 설명의무의 주요내용 및 법률관계에 대해 비교ㆍ검토하고, 금융소비자보호법상 설명의무 관련 규제의 보완점을 분석하여 향후 개선과제들에 대해 생각해보고자 한다.

금융소비자보호법에서의 사후구제 제도에 관한 고찰

글로벌 금융위기 이후 우리나라는 KIKO, 동양증권, 저축은행 사태 등 대규모 금융소비자피해 사례를 겪으며 금융소비자보호에 관심을 기울였고, 약 10년의 노력 끝에 동법은 2021년 3월 25일 시행되었다. 금융소비자보호법은 금융소비자보호에 관한 기본법이며 6대 판매원칙을 정비하고 동일기능-동일규제라는 기능별 규제체계를 도입하였다. 특히 금융소비자의 금융피해 발생 시 구제수단을 강화하였다. 우선 분쟁조정제도의 실효성을 위해 소송절차중지제도, 소액사건 분쟁조정 시 이탈금지제도를 마련하였고, 소송에서는 소비자의 입증부담을 덜어주고자 설명의무위반에 대해 고의ㆍ과실이 없음을 금융회사가 입증하도록 하였다. 그리고 소비자의 권익을 강화하기 위하여 자료열람요구권, 청약철회권, 위법계약해지권을 도입하였고, 마지막으로 금융회사의 위법행위를 막고 소비자피해를 최소화하기 위하여 징벌적 과징금 제도와 판매제한명령권을 도입하였다. 이러한 제도들은 금융소비자를 두텁게 보호할 것이라 기대된다. 추가로 도입이 논의되는 제도들도 있으나 향후 법을 시행하면서 개선해나가면 될 것이다. 다만, 지나친 규제는 금융산업의 발전을 저해하므로 균형 잡힌 시각에서 금융소비자보호제도를 정비해 나가야 하겠다.

A Critical Assessment of the Need for Harmonization of the Legal Framework Concerning Abusive Informal Debt Collection Practices in the European Union

The loss of jobs and the decline in real incomes caused by the 2008 financial crisis and the COVID-19 pandemic have affected consumers’ ability to repay their debts. These have led to high ratios of non-performing loans (NPLs), which affect the stability of the financial industry and undermine economic recovery. The result has been a need for faster debt enforcement and a drastic increase in abusive informal debt collection practices (IDCPs). In the EU, the need to regulate and harmonize abusive IDCPs surfaced in 2018 in connection to the Proposal for a Directive on Credit Servicers, Credit Purchasers and the Recovery of Collateral (CSDP). The directive would enable banks to outsource the servicing of NPLs to a specialized debt collector, but it contained no protection rules against abusive IDCPs. In this article, the researcher critically assesses the need for harmonization of the legal framework concerning abusive IDCPs in the EU, mainly from the standpoint of the initial and current text of the CSDP. Where necessary, the researcher will refer to both historical and comparative law perspectives. The researcher focuses on the legal character of informal debt collection, its relation to financial services, and its potential sui generis character. After that, the researcher will address the arguments for and against establishing pan-EU sector-specific legislation dedicated to IDCPs. Next, the researcher discusses the constitutional authority of the EU to regulate abusive IDCPs. Finally, the researcher will examine the interaction of the CSDP with other consumer (financial) protection instruments to identify the best solution for harmonizing abusive IDCPs at the EU level. The researcher will juxtapose several dichotomies: general versus sector-specific, procedural versus substantive, minimum versus maximum harmonization, and hard versus soft regulation. In the conclusion, the researcher shall synthesize the core problems and suggest an approach.

Cash economy, criminality and cash regulation in Ethiopia

PurposeThis paper aims to examine the contribution of Ethiopia’s cash economy to financial crimes. It also investigates the regulation of cash in the context of controlling crime stemming from the cash economy.Design/methodology/approachThis study relies on primary data generated from 20 interviewees drawn from the National Bank of Ethiopia, Ethiopian Financial Intelligence Center, selected commercial banks and law enforcement agencies and document review from government reports, media press and statutes, as well as secondary data from online and offline sources.FindingsThe cash-intensive nature of Ethiopia’s economy has enabled a significant amount of cash to circulate outside of the formal financial system. This money is partly to blame for the prevalence of criminal activities such as cash hoarding, corruption and illicit financial flows. To address the threat of crime posed by the cash economy, the Ethiopian Government has taken measures such as restricting cash withdrawals from financial institutions, limiting the amount of cash individuals can hold and demonetizing the banknotes. The measures enable the banks to collect the cash circulating outside of the formal financial sector. However, the effect of these measures on reducing future criminality remains uncertain. Improving the financial inclusivity of the country, specifically expanding basic financial products to the rural areas, digitalizing the country’s payment system, raising general financial awareness and establishing a strong financial consumer protection framework would play a critical role in reducing future criminality and transforming the cash-intensive into a cashless economy.Originality/valueThis paper provides a first-of-its-kind analytical perspective on the contribution of Ethiopia’s cash economy to criminal activity and the adequacy of countermeasures so far taken.

Quality of life and perceived financial implications among otorhinolaryngologists during the COVID-19 pandemic across India.

SUMMARYObjectiveThe changing trends in medical practice, uncertainties and monetary apprehensions due to the COVID-19 pandemic may influence the sense of well-being among otorhinolaryngologists. The present study was conducted to evaluate quality of life (QOL) and perceived financial implications in otorhinolaryngologists during the COVID-19 pandemic across India.MethodsA cross-sectional study was carried out among otorhinolaryngology specialists across India using WHOQOL-BREF and Consumer Financial Protection Bureau (CFPB) Financial Well-Being Scale questionnaires on Google Forms, which was kept open for the latter half of July 2020.ResultsA total of 358 responses were obtained; the response rate was 26.64%. Twenty-four percent of respondents worked exclusively in academic settings; 40.22% of specialists had over 10 years of work experience. Average monthly income in 2019 was between 1-3 lakhs Indian Rupees (INR) in 43.85%, while in 2020, 62.57% of the specialists had an average monthly income of below one lakh INR; this difference was statistically significant (p < 0.001). Mean WHOQOL-BREF scores for physical, psychological, social and environmental domains were 68.8 ± 1, 62.3 ± 0.75, 68.9 ± 1.17 and 65.8 ± 1.01, respectively; mean CFPB financial well-being scale score was 55.5 ± 0.66. QOL and financial well-being were better in otolaryngologists older than 60 years, male specialists and private consultants.ConclusionsThere has been a tremendous impact on quality of life and financial well-being among otorhinolaryngologists in India during the COVID-19 pandemic. The study outcome may help otolaryngologists comprehend and perceive the extent to which it has affected their professional and personal lives, and explore ways to face and overcome the situation.

A Study on the Main Contents and Improvement Tasks of Financial Consumer Protection Act

A Study on the Main Contents and Improvement Tasks of Financial Consumer Protection Act

Europe in the digital age: regulating digital finance without suffocating innovation

ABSTRACT The expansion of the cryptocurrency market in the last 10 years has been exponential and a ‘watch and wait strategy’ towards the regulation of crypto-assets is no longer appropriate and justifiable. Opportunely, the European Union (EU) has recognised the need for a digital finance strategy to address regulatory gaps and help relaunch and modernise the European economy in the aftermath of the COVID-19 pandemic. The philosophy behind the EU Digital Finance Strategy, in particular the proposed Regulation on Markets in Crypto-Assets (MiCA) and the proposed Digital Operational Resilience Act (DORA), is innovation-friendly. The EU legislative initiatives seek to unlock the potential of crypto-assets while mitigating the risks to financial stability, market integrity and consumer protection. This will lead to additional and better financial products for consumers, improving financial inclusion and financing of businesses.

A Study on the Duty of Explaining in Financial Consumer Protection Act - Focusing on Insurance Company -

A Study on the Duty of Explaining in Financial Consumer Protection Act - Focusing on Insurance Company -

PERAN OTORITAS JASA KEUANGAN CIREBON PADA PERLINDUNGAN KONSUMEN FINANCIAL TECHNOLOGY LENDING

The Financial Services Authority (itself is an institution that is independent and free from interference from other parties, which has the functions, duties and authority of regulation, supervision, inspection and investigation. Consumers themselves are one of the unimportant in running their business. From the government, they act really how to support customers with challenges faced by consumers, in terms of consumer financial services protection, the Financial Services Authority (OJK) and the government's extension of the peer to peer lending. The method used in this research is qualitative by using normative juridical. Data collection techniques were carried out using the triangulation method with observation, interviews and documentation. The efforts of the financial authorities related to consumer protection are already good with SATGAS Investment Alert, fintech emergency numbers, but it is still has not been maximized and needs to be increased again. The community itself still believes that applications with four or more stars and good reviews are official applications.

Congress ends surprise billing: implications for payers, providers, and patients.

Compromise over ending surprise billing had consistently hit a deadlock as providers, payers, and patient groups found themselves at odds over mechanisms to resolve payment. The COVID-19 pandemic, however, accelerated legislative action on health care proposals, leading to the last-minute passage of the No Surprises Act at the end of 2020. The law marks a rare bipartisan success that promises to secure patient protections while also adding price transparency tools. Importantly, it creates an independent dispute resolution process that balances the demands of payers and providers in negotiating surprise billing. While the cost implications of this process will not be known until after implementation in 2022, it creates a template for states to emulate. Furthermore, it will reorient the relationships among payers and provider groups that have historically relied on out-of-network billing. This new competitive reality is an important step for consumer financial protection in health care.

Unfair, Deceptive, and Abusive Acts and Practices in the Servicing of Void and Unenforceable ISAs

This memo explores how state law may render many ISA companies’ contracts unenforceable, and how the continued servicing of voided debts may amount to a violation of state and federal law. As the memo discusses, this finding may have far-reaching legal consequences for the growing share of the student loan industry involved in ISA servicing. Because they meet the definition of loans, ISAs must comply with various state and federal consumer protection statutes and regulations. An SBPC investigation reveals that various ISA providers may be violating many of these state laws, including state usury and licensing statutes, and that violations along these lines often render consumer debts void. The SBPC’s analysis indicates that state and federal law enforcement agencies such as the Consumer Financial Protection Bureau already have the capability to hold companies accountable for servicing unenforceable debt.

Evolution and Innovation on China’s Legal System of Internet Finance in the Context of Blockchain Technology

With the growing popularity of bitcoin, blockchain technology, as its underlying technology, has gained more and more attention. The technical innovation brought by blockchain technology such as decentralization and strong trust mechanism coincides with the nature of finance, which brings a new variable to the development of Internet finance, promotes the innovation in financial products and accelerates the development of mixed operation. At the same time, however, China’s current legal system of Internet finance is impacted by digital finance, which presents difficulties such as weakening the main bodies of financial regulation, confusing the objects of financial regulation and making it more difficult to protect financial consumers. Therefore, in the application of digital finance technology such as blockchain technology, Internet finance laws need to change the path of institutional evolution to meet the regulatory requirements brought by new technologies. The reform and impact of blockchain technology are promoting the transformation of Internet financial regulation mode from separate institutional regulation to functional regulation, from institutional regulation to technological regulation, and from monocentric regulation to multicentric regulation, as well as the transformation of the financial consumer protection mechanism.

Punishment or Forgiveness? Loan Modifications in Private Label Residential Mortgage-Backed Securities from 2008 to 2014

ABSTRACT I estimate the extent to which modifications of privately securitized mortgages increased or forgave debt during the Great Recession and aftermath, from 2008 to 2014. I find that loan modifications weakened household balance sheets by adding $20 billion to household debt, with the net amount of debt added per modification doubling from 2010 to 2014. I also find that the increase in debt is consistent with capitalization of fees, but not missed interest payments. Capitalization of fees is significant because it has been associated with a principal-agent problem between investors and mortgage servicers preventing efficient loss mitigation, as well as consumer financial protection abuses.

Voice of the Customers: Local Trust Culture and Consumer Complaints to the CFPB

ABSTRACTWe use complaints filed with the Consumer Financial Protection Bureau (CFPB) to study the interplay between social norms and the effectiveness of consumer protection laws. We find that a higher level of trust in a given location is associated with a lower number of complaints filed against financial institutions in that location. Employing a difference‐in‐differences approach, we further find that, after the establishment of the CFPB, banks in low‐trust areas reduce fees charged to consumers more compared to banks in high‐trust areas. Our results suggest that the threat of consumer complaints to a government agency affects how banks treat their customers, and they shed light on the interaction between informal culture and formal institutions, as well as on stakeholders’ influence in corporate policies.

The level of financial inclusion in Ukraine: Measuring access, quality, and usage of financial products and services

While financial inclusion is seen as a goal of socio-economic development, there is still no clear understanding of how to measure it. Following this concern, the paper deals with the computation of the financial inclusion index of the Ukrainian economy using an annual dataset spanning from 2008 to 2020 and following the Sarma methodology. The object of the study is a set of indicators of usage, access and quality of financial products and services. The obtained results demonstrate the medium level of financial inclusion. The improvement of financial inclusion is observed in 2012, 2013, 2020 (namely 0.55 – 0.56 in the range of 0 and 1). From 2015 (0.38) till 2018 (0.39), the revealed downward trend affirms that the withdrawal of banks from the market has deteriorated the level of quality and usage of financial products and services. Financial inclusion declined during the cleaning up of the banking system in 2014–2016, just as it did after the global financial crisis in 2009–2010. Despite the development of the payment infrastructure, there is a need to diversify access, increase quality, and quicken the usage of financial products and services due to existing distrust in national financial institutions. Improving financial literacy and consumer protection, and closing regulatory gaps in the non-banking sector are seen as ways to enhance financial inclusion. Thus, financial regulators should establish an upward trend in financial inclusion that will ensure full access to formal financial services and will not adversely affect the stability of financial system.

Keterbukaan Informasi Sebagai Mitigasi Risiko Peer To Peer Lending (Perbandingan Antara Indonesia Dan Amerika Serikat)

The development of peer to peer lending (P2PL) in Indonesia will always be followed by the formation of the latest regulations. However, the existing regulations do not sufficiently regulate the disclosure of information. On the other hand, in the United States as the country with the largest P2PL, information disclosure is a major part in the implementation of P2PL. The approaches used in this research are a conceptual approach, a statutory approach, and a comparative law approach. The results conclude that obtained are that the regulation regarding P2PL does have an obligation to disclose information, but the regulation is not comprehensive because it is exclusive and limited. In fact, the disclosure of information can be a part of risk mitigation in P2PL, for example, minimizing the risk of problem loans. Meanwhile, in the United States, through the Security Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB), detailed and periodic information disclosure is available. So that both prospective borrowers and potential lenders can consider the risks and capabilities of each party more before making transactions in P2PL. This then can be one of the risk mitigation for P2PL in the United States.