The Cost of Credit: Protecting Consumers in a Regulated Fringe Credit Market proposes that federal fair lending laws must be expanded to cover more fringe consumer financial products and services to provide protection of lower to moderate income consumers seeking credit. The financial crisis of 2007–2010 made clear the need for regulatory changes in the overall financial services industry. From the crisis going forward it was made more apparent that there was a greater need to further regulate sectors of the financial services industry that provide alternative sources of credit to American consumers who did not qualify for traditional mainstream credit. The Consumer Financial Protection Bureau (CFPB) was created to address this need for change and implement said changes, but the bureau has fallen short of its mission.
This paper contends that the CFPB’s inaction in regulating the retail rent to own industry is a failure to carry out the bureau’s purpose of ensuring that all consumers have access to fair, affordable, and sustainable credit. Ensuring consumers access to fair, affordable, and sustainable credit, specifically lower to moderate income consumer requires that the bureau regulates additional fringe credit markets that fall under its authority. This paper reasons that this regulatory authority comes from the CFPB’s power to regulate any provider that offers or extends credit to consumers. This paper makes the argument that the extension of credit in the retail rent own market should be regulated to the same extent that no credit check pay day and title loans are.
Furthermore, this paper maintains that retail rent to own arrangements, pay day and title loans may be too costly for consumers overtime because they do not help consumers move into the mainstream traditional credit market, but instead keeps them in a cycle of high cost and low benefit borrowing. However, with no alternative credit option for these consumers it is not feasible to prohibit these financial products and services, therefore further federal regulation is essential to protect consumers. Ultimately, this paper provides recommendations to lawmakers that if accepted will further strengthen consumer protections in the consumer credit market.
|Advisor:||Kovacic, William E.|
|School:||The George Washington University|
|School Location:||United States -- District of Columbia|
|Source:||MAI 57/05M(E), Masters Abstracts International|
|Subjects:||Marketing, Finance, Banking|
|Keywords:||Consumer credit, Consumer financial protection, Consumer financial services, Payday loans, Rent to own, Title loans|
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