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Exposing De-Regulatory Myths in Consumer Financial Protection

Better Markets released a blog post debunking three prominent de-regulatory myths in financial regulation. As new leadership is appointed at the regulatory agencies, now is a good time to reflect on some of the most egregious mistakes of the prior administration in the area of financial regulation—in short, to remember what not to do when it comes to protecting investors and consumers in our financial markets. Part of that exercise is piercing through the myths advanced again and again by the regulated industry and its allies in policymaking positions to justify de-regulation and weak regulation. 

That’s what Stephen Hall, Legal Director and Securities Specialist, with research assistance by Michael Hughes, Research and Program Assistant, have done. The blog refutes three fictions that resurged under the Trump administration, particularly at the Consumer Financial Protection Bureau (“CFPB”).  In reality, and contrary to some of the financial industry’s favorite talking points, 1) regulation protects consumers without depriving them of access to credit; 2) technology poses serious risks, as well as benefits in finance and it must be accompanied by strong guardrails to ensure that it doesn’t upend markets and harm investors; and 3) state regulation has a vital role to play in consumer protection and it should not be subject to sweeping preemption.  

Debunking myths about regulation is not merely an intellectual exercise. Policymakers guided by these theories cause direct, real-world harm to vulnerable consumers by repealing important protections, creating weak new rules that cater to the industry, and undermining enforcement programs. We must therefore constantly expose and oppose these false narratives about the role of financial regulation, and we urge the new leaders at the regulatory agencies to reject them as they revitalize consumer and investor protection.

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