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Systemic Risk Oversight And The Shifting Balance Of State And Federal Authority Over Insurance Dec 2014

Systemic Risk Oversight And The Shifting Balance Of State And Federal Authority Over Insurance

Patricia A. McCoy

The state-based model of U.S. insurance regulation has been remarkably enduring to date, in part because the traditional rationales for a greater federal role – efficiency, uniformity, and consumer protection – have not succeeded in displacing it. However, the 2008 financial crisis, the federal government’s unprecedented bailouts of parts of the insurance sector, and the need for a coordinated international approach radically shifted the debate about the proper allocation of power between the federal government and the states by supplanting traditional concerns about efficiency, uniformity, and consumer protection in insurance with a new federal mission to control systemic risk. Unprepared …


A Tale Of Three Markets: The Law And Economics Of Predatory Lending, Kathleen Engel, Patricia Mccoy Mar 2014

A Tale Of Three Markets: The Law And Economics Of Predatory Lending, Kathleen Engel, Patricia Mccoy

Patricia A. McCoy

Predatory lending - the practice of making exploitative high-cost loans to naive borrowers - has spurred policy-makers, activists, lenders and scholars to debate whether intervention is warranted and, if so, what type of intervention is appropriate. The solution requires understanding the incentives in the home mortgage market that have fueled predatory lending. Recent changes in the credit market have created new possibilities for lenders to profit by exploiting information asymmetries to the detriment of unsophisticated borrowers. As a result, a new, predatory lending market has emerged alongside the legitimate prime and subprime home mortgage markets. Neither market forces nor existing …


The Cra Implications Of Predatory Lending, Kathleen Engel, Patricia Mccoy Mar 2014

The Cra Implications Of Predatory Lending, Kathleen Engel, Patricia Mccoy

Patricia A. McCoy

Traditionally, policymakers, communities, and industry have regarded the Community Reinvestment Act ("CRA") as a positive mandate for banks and thrifts to do good by increasing investment in low- and moderate-income ("LMI") neighborhoods. When Congress enacted CRA, it was inconceivable that LMI neighborhoods might eventually receive too much credit in the form of abusive mortgages. However, by the late 1990s, predatory mortgages- exploitative high-cost loans to gullible borrowers-were ravaging the inner cities. We address the question: given the surge in predatory lending, how should CRA respond? CRA and federal subsidies to regulated lenders can create perverse incentives for lenders to engage …


The Consumer Financial Protection Bureau: Financial Regulation For The 21st Century Jun 2012

The Consumer Financial Protection Bureau: Financial Regulation For The 21st Century

Patricia A. McCoy

After existing regulatory systems failed to prevent the recent financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform designed to alleviate the crisis and prevent its recurrence. Out of this Act, the Consumer Financial Protection Bureau was born. This new agency is charged with making markets for consumer financial products and services work for Americans, a task that was previously spread out among seven different federal agencies with varying priorities. This Article describes, with a series of concrete case studies, four key principles that have guided the Bureau as it strives to fulfill …


Federal Preemption And Consumer Financial Protection: Past And Future Feb 2012

Federal Preemption And Consumer Financial Protection: Past And Future

Patricia A. McCoy

Starting in 1995 and throughout the subprime boom during the next decade, Congress failed to take action to curb predatory mortgage lending. Many states and cities filled the void by passing anti-predatory lending laws of their own. Lenders, worried about potential liability, quickly organized a full-scale attack on the state and local initiatives. Their most potent strategy lay in challenging the laws and ordinances under federal preemption rules for national banks and federal savings associations that precluded states from enforcing their anti-predatory lending laws.

The Dodd-Frank Act curtailed the preemption rules by establishing that state consumer financial laws can only …


Public Engagement In Rulemaking: The Consumer Financial Protection Bureau’S New Approach Dec 2011

Public Engagement In Rulemaking: The Consumer Financial Protection Bureau’S New Approach

Patricia A. McCoy

No abstract provided.


From Credit Denial To Predatory Lending: The Challenge Of Sustaining Minority Homeownership Dec 2007

From Credit Denial To Predatory Lending: The Challenge Of Sustaining Minority Homeownership

Patricia A. McCoy

Years of discriminatory behavior against minority households have damaged their ability to build wealth. One of the most financially destructive practices endured by minority households is the excessive overpayment to finance a home purchase or access accumulated equity in a home. The market conditions that position blacks, and to a lesser extent, Latino households, to be the principal targets of predatory mortgage lending have their roots in decades of legally sanctioned housing market discrimination. Some minority households lack the financial knowledge or awareness to protect themselves. In other cases, years of discriminatory financial practices have contributed to rendering them ineligible …


A Tale Of Three Markets: The Law And Economics Of Predatory Lending Apr 2002

A Tale Of Three Markets: The Law And Economics Of Predatory Lending

Patricia A. McCoy

Predatory lending - the practice of making exploitative high-cost loans to naive borrowers - has spurred policy-makers, activists, lenders and scholars to debate whether intervention is warranted and, if so, what type of intervention is appropriate. The solution requires understanding the incentives in the home mortgage market that have fueled predatory lending. Recent changes in the credit market have created new possibilities for lenders to profit by exploiting information asymmetries to the detriment of unsophisticated borrowers. As a result, a new, predatory lending market has emerged alongside the legitimate prime and subprime home mortgage markets. Neither market forces nor existing …