VOLUME 15 • COLUMNS
IS FEDNOW THE SOLUTION, A SOLUTION, OR NO SOLUTION
Muhui Shi1Visiting Researcher, Harvard Law School; SJD candidate, University of Michigan Law School. I would like to express my heartfelt gratitude to Professors Howell Jackson, John Pottow, and Jeffery Zhang for their invaluable guidance and insightful advice. I am also deeply appreciative of Professors Eric Christiansen and Julian Arato for their unwavering support and warm encouragement.
The new FedNow system promised to restore the U.S. payment system to its rightful place with once-in-a-generation innovation. Against popular belief, this paper, based on recent data on FedNow’s operation, argues that this proclaimed game-changer is an empty promise. The failure of FedNow—going beyond structural designs, consumer protection, or governance level—was rooted in the Fed’s involvement. The Fed’s involvement in the real-time retail payment market was both unnecessary and poorly timed. FedNow, offering almost identical service to its private counterpart, RTP, is now stuck in an awkward place; it should have been implemented before RTP entered the market or waited for RTP to fully develop the market.
VOLUME 15 • ISSUE 1 • PRINT
“PRICE DISCRIMINATION” DISCRIMINATION
Talia B. Gillis2Associate Professor, Columbia Law School. The author would like to thank Ian Ayres, Nikita Aggarwal, Neil Bhutta, Matthew Bruckner, Jessica Bulman-Pozen, Raul Carrillo, Kelly Cochran, Luke Herrine, Howell Jackson, Madhav Khosla, Ela Leshem, Wenli Li, Dorothy Lund, Justin McCrary, Lev Menand, Vitaly Meursault, Haggai Porat, Jeff Sovern, Eric Talley, Rory Van Loo, and participants in the Cardozo Law Symposium on Automating Bias, the Wharton FinReg Conference 2022, the Alabama Law Faculty Colloquium, the Wayne State Faculty Workshop, the NYU Public Law Workshop and the NYU Colloquium on Innovation Policy for thoughtful comments. Brent Allen, Elena Carroll-Maestripieri, Susie Emerson, Sean Kwon, DanLan Luo, Ryan Sandler, Sahil Soni, and Reece Walter provided excellent research assistance.
Credit price personalization, where lenders set prices based on individual borrower and loan characteristics, is a common practice across many loan types, with conventional accounts of its harms focusing on the ways in which risk-based pricing, or setting prices based on borrowers’ credit risk, can lead to disparities for protected groups like racial minorities and women. This Article examines an often-overlooked yet potentially harmful form of price personalization—charging borrowers different rates based on their willingness-to-pay, known as price discrimination—and argues that this practice can exploit vulnerable borrowers, including protected groups like racial minorities and women, by imposing higher costs unrelated to their credit risk, resulting in what I term “price discrimination” discrimination. Beyond entrenching financial disparities, price discrimination can exacerbate default risks, especially as the use of big data and artificial intelligence can make price discrimination more pervasive.
VOLUME 9 • COLUMNS
HEALTH INSURANCE PLAN REGULATION AFTER THE AFFORDABLE CARE ACT: A COST-BENEFIT ANALYSIS COMPARISON
Marlan Golden
In a rapidly evolving healthcare landscape, particularly since the enactment of the Patient Protection and Affordable Care Act (ACA) in 2010, regulators have confronted a number of challenges in crafting general rules of prospective applicability for health insurance plans. These challenges include quantifying costs and benefits of regulatory actions that seem difficult to predict, monetizing certain benefits, satisfying the demands of a robust cost-benefit analysis regime, and accounting for heightened uncertainty in the healthcare markets and recently, on Capitol Hill.
VOLUME 9 • COLUMNS
THE CFPB ARBITRATION RULE
Andrew Palmer
This paper analyzes the recent enactment and subsequent rescission of the Arbitration Agreements Rule3Arbitration Agreements, 82 Fed. Reg. 33,210 (July 19, 2017) (to be codified at 12 C.F.R. pt. 1040).(Arbitration Rule or Rule) promulgated by the Consumer Financial Protection Bureau (CFPB or Bureau), which bans the use of mandatory arbitration clauses in many types of financial contracts. Specifically, the paper will examine the life and death of the Rule through the lens of the types of cost-benefit analyses (CBA) undertaken by the Bureau in issuing the Rule. This analysis will consider the unique structure and administrative position of the CFPB, and use its authorizing legislation in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act4Formally, the statute is the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).(Dodd-Frank or DFA) to compare and contrast its cost-benefit analysis procedures with that of other administrative agencies, particularly in the financial regulatory space. Beyond the narrow scope of the application to the Arbitration Rule—and its rescission—this analysis will necessarily touch on larger constitutional, procedural, and governance challenges to the existence structure of the CFPB, a major contributor to the ire over the Rule in question.
VOLUME 6 • COLUMNS
CAN VOLUNTARY PRICE DISCLOSURES FIX THE PAYDAY LENDING MARKET?
Jim Hawkins
Eric J. Chang’s provocative article, www.PayDayLoans.gov: A Solution for Restoring Price-Competition to Short-Term Credit Loans—which, as its title suggests, proposes to facilitate price competition in the payday lending market by creating a federal online exchange for payday lenders to post lending rates—has sparked thoughtful reactions among consumer borrowing experts. This Response provides constructive criticism to Chang’s proposal, arguing that such an exchange is unlikely to meet its goal of restoring price competition and offering tweaks that would raise the likelihood of doing so.
VOLUME 6 • COLUMNS
WWW.PAYDAYLOANS.GOV: A SOLUTION FOR RESTORING PRICE-COMPETITION TO SHORT-TERM CREDIT LOANS
Eric J. Chang
Much of United States financial regulation has been predominantly based upon using mandated disclosure to facilitate price-competition. However, in the realm of payday lending, disclosure based regulation has received significant criticisms from regulators and consumer advocates. While federal action may be necessary to solve the payday lending problem, this Article argues that a movement towards stricter and more stifling regulations is an overreaction to the statement that disclosure is not working. Instead, this Article proposes a less burdensome but much more effective alternative: a federal online exchange for payday lenders to list and post lending rates.
VOLUME 2 • COLUMNS
REGULATING PAYDAY LOANS: WHY THIS SHOULD MAKE THE CFPB’S SHORT LIST
Nathalie Martin
In response to the nation’s biggest financial challenge since the depression, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which in turn created the Consumer Financial Protection Bureau (the “CFPB”). The mission of the CFPB is to ensure that “markets for consumer financial products and services are fair, transparent, and competitive.” The Act prohibits unfair, deceptive, and abusive acts, and charges the CFPB with creating rules and enforcement actions against all covered persons that engage in an “unfair, deceptive, and abusive act or practice.” The Act also requires that the CFPB regulate consumer disclosures and test consumers to see how those disclosures are working.
VOLUME 2 • COLUMNS
DEBIT INTERCHANGE REGULATION: ANOTHER BATTLE OR THE END OF THE WAR?
Stacie E. McGinn and Mark Chorazak
As one governor of the Board of Governors of the Federal Reserve System (the “Board” or “Federal Reserve”) recently observed, “the financial crisis spawned or strengthened many reform agendas—among them consumer protection, securities and commodities market regulation, and traditional bank regulation.” The crisis also created opportunities unrelated to these reform agendas. At least one group—merchants—realized a legislative goal that had been unimaginable a year earlier: giving the Federal Reserve the authority to set debit interchange rates.
VOLUME 1 • COLUMNS
CONSUMER CASUALTIES?
Amy J. Schmitz
On July 21, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which among other things calls for creation of the Consumer Financial Protection Bureau (CFPB) to serve as a centralized agency charged with protecting consumers from lending abuses and improper practices. The question is when and whether this agency will come to fruition—or suffer as a casualty of political warfare. This CFPB has instigated a firestorm among liberals and conservatives. Liberals raise the CFPB as an engine for consumer protection from rampant lender abuses and “big bad banks.” Conservatives denounce the Bureau as expensive regulatory fluff in a “leftist” campaign to take over private business.
VOLUME 1 • COLUMNS
FINRA PROPOSED RULE CHANGE WOULD GIVE CUSTOMERS OPTION OF ALL-PUBLIC ARBITRATION PANELS
Barbara Black
Brokerage firms customarily include in their customers’ agreements a predispute arbitration agreement requiring that investors arbitrate their disputes before an arbitration panel of the Financial Industry Regulatory Authority (FINRA). Current rules governing customers’ claims over $100,000 require each three-person panel to include one non-public, or industry, arbitrator in addition to one public arbitrator and one chair-qualified public arbitrator. Investor advocates long have argued that the mandatory inclusion of an arbitrator with ties to the securities industry was unfair to investors and gave the securities industry one decision-maker who would be sympathetic to its position.