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Does ‘Open Finance’ Promote Competition or Facilitate Free Riding?

TOTM Financial technology, or so-called “fintech,” is disrupting the financial sector, and that’s a good thing. Fintech services are making finance more digital and more user-friendly. . . .

Financial technology, or so-called “fintech,” is disrupting the financial sector, and that’s a good thing. Fintech services are making finance more digital and more user-friendly. This, in turn, has led to reduced transactions costs and increased levels of competition, innovation, and financial inclusion.

Alas, the emergence of fintech has also been accompanied by a rising chorus of the usual “if it’s good, mandate it; if I don’t like it, forbid it” reasoning that has motivated so many prior waves of regulatory intervention. The resulting regulations may be well-intentioned, but they more often than not lead to unintended consequences.

Read the full piece here.

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Financial Regulation & Corporate Governance

As Global Temperatures Set New Records, Policyholder Advocates Continue to Deny the Science

Popular Media We learned this week that July 4’s average global temperature of 62.92 degrees Fahrenheit was the world’s hottest day since at least 1979, when the . . .

We learned this week that July 4’s average global temperature of 62.92 degrees Fahrenheit was the world’s hottest day since at least 1979, when the U.S. National Centers for Environmental Prediction began keeping records, and potentially the hottest in about 125,000 years.

And yet, in a world in which even ExxonMobil concedes the reality of climate change and touts that it is “playing a leading role in the transition to a lower-emission future,” it appears that insurance “consumer advocates” constitute the group most steadfast in their refusal to come to grips with what adapting to a warmer planet inevitably entails.

Read the full piece here.

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Financial Regulation & Corporate Governance

The Plan to Make Credit Cards More Expensive

Popular Media Democratic lawmakers like Illinois Sen. Dick Durbin and the Justice Department’s Antitrust Division want to impose new rules for credit-card transactions that would reduce competition, harm consumers . . .

Democratic lawmakers like Illinois Sen. Dick Durbin and the Justice Department’s Antitrust Division want to impose new rules for credit-card transactions that would reduce competition, harm consumers and crush small banks.

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Financial Regulation & Corporate Governance

The Paradoxical Perils of Mandatory ‘Competition’ in Merchant Routing of Credit-Card Transactions

TOTM Sen. Richard Durbin (D-Ill.) earlier this month introduced legislation that aims to manufacture competition in the routing of credit-card transactions. If enacted, the measure would require that . . .

Sen. Richard Durbin (D-Ill.) earlier this month introduced legislation that aims to manufacture competition in the routing of credit-card transactions. If enacted, the measure would require that merchants be able to choose from at least two networks when processing most credit-card transactions.

Read the full piece here.

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Financial Regulation & Corporate Governance

Student Loans and Financial Distress: A Qualitative Analysis of the Most Common Student Loan Complaints

Scholarship Abstract Student loan servicers are the face of the U.S. student loan system, and they are not well-liked. Using the Consumer Financial Protection Bureau’s (the . . .

Abstract

Student loan servicers are the face of the U.S. student loan system, and they are not well-liked. Using the Consumer Financial Protection Bureau’s (the CFPB) consumer complaint database, we study borrower perceptions of the student loan system. We qualitatively analyzed a sample of complaint narratives drawn from every student loan complaint ever filed with the CFPB. Our analysis of these complaint narratives reveals clear patterns of discontent in four primary areas: 1) a mismatch between ability to repay and repayment options, including problems with forbearance, deferments, the public service loan forgiveness program, income-driven repayment plans, and loan cancellation options; 2) customer service, including sudden and unexplained changes in payment obligations, 3) inappropriate payment processing, such as misapplying payments; and 4) unauthorized loans or outright scams. The first issue was, by far, the most common. Our results high-light areas where better regulation, whether through contract with the government, ex ante supervision by regulators, or ex post lawsuits in court, has the potential to improve the function of the student loan ecosystem.

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Financial Regulation & Corporate Governance

Restoring the Rule of Law in Finance

Scholarship The unraveling of the rule of law in finance is inherent in the system’s discretionary process of regulation. Each financial crisis begets new regulations and . . .

The unraveling of the rule of law in finance is inherent in the system’s discretionary process of regulation. Each financial crisis begets new regulations and new regulatory agencies with more expansive and discretionary powers. The general entanglement of finance, leftist interest groups, and the federal regulatory apparatus has created a threat to freedom that is almost unique in history. Leftist activists, “woke” corporations, and regulators and politicians have recognized and acted on the opportunity to use the financial regulatory system both to enact preferred policies through anti-democratic means and to silence their ideological opponents. As governmental power grows, the threat of its misuse grows concomitantly.

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Financial Regulation & Corporate Governance

Todd Zywicki on Rate Caps

Presentations & Interviews ICLE Academic Affiliate Todd Zywicki joined Southwest Public Policy Institute President Patrick M. Brenner on SPPI’s SPPI-TV podcast to discuss interest rate caps and the role . . .

ICLE Academic Affiliate Todd Zywicki joined Southwest Public Policy Institute President Patrick M. Brenner on SPPI’s SPPI-TV podcast to discuss interest rate caps and the role of the Consumer Financial Protection Bureau (CFPB). Video of the full episode is embedded below.

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Financial Regulation & Corporate Governance

Instead of Making It Expensive to Own a Car, Why Not Make It Expensive to Use Instead?

Popular Media Before writing this commentary, I checked trending searches on Google over the last quarter. Among Singapore’s favourite three-letter acronyms, the top was HDB, followed by CPF and COE. . . .

Before writing this commentary, I checked trending searches on Google over the last quarter. Among Singapore’s favourite three-letter acronyms, the top was HDB, followed by CPF and COE. That is until May 4, when the Certificate of Entitlement (COE) trumped Housing and Development Board (HDB) and Central Provident Fund (CPF).

It’s worth stressing that COEs are not the top concern of all Singaporeans. They are the top concern of a relatively vocal segment – especially recently, with COE prices crossing S$100,000 (US$75,000) and continuing to trend upwards.

Read the full piece here.

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Financial Regulation & Corporate Governance

Junkyard Dogs: The Law and Economics of ‘Junk’ Fees

Scholarship Abstract The notion of “junk” fees is a fine piece of rhetoric, but useless as an analytical tool. Many fees identified as junk impose costs . . .

Abstract

The notion of “junk” fees is a fine piece of rhetoric, but useless as an analytical tool. Many fees identified as junk impose costs on consumers who generate those costs – rather than forcing others to subsidize their behavior. For example, credit card late fees deter late payments and their associated costs while only world travelers pay foreign currency transaction fees. There is no reason for ordinary consumers to subsidize either group. Because information is costly, consumers rationally focus on the elements of price that are most important in their own circumstances. Requirements to disclose everything everywhere will only interfere with this process. Both the structure of pricing, and the level of prices, should be determined by competition in the marketplace. As we observe, the result is detailed fee structures for some products and services, and bundled pricing for others. Attempts to regulate pricing structures by requiring itemized prices increased the costs of real estate settlements. Regulating components of credit card pricing structures led to increases in other fees and reductions in credit availability. Competition over pricing structures is far more likely to satisfy consumer preferences than an inevitably overbroad set of regulatory requirements

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Financial Regulation & Corporate Governance