Consumer Protection Law Commons^™

Why Bigger Is Not Always Better: Dodd-Frank & Its Impact On Small Banks & Businesses, Sarah King

Journal of Civil Rights and Economic Development

(Excerpt)

Imagine that the year is 2006. Along with partners and investors, you have just taken one of the biggest risks of your life and founded a small business. Specifically, your business acts as a broker of financial instruments known as energy derivatives; it matches buyers and sellers of futures, options, and other derivatives, and a portion of the money made from the trade is collected as a fee for your services. For the most part, the business runs smoothly. You’re rarely stressed, your customers are satisfied with your services, and you and your co-workers make good money.

Imagine that …

The Cfpb’S Endaround, Chris O'Brien

Catholic University Law Review

The financial crisis of 2008 led Congress to enact the Dodd-Frank Wall Street Reform and Consumer Protection Act and establish the Consumer Financial Protection Bureau (CFPB) to better protect consumers. Although Dodd-Frank and the CFPB introduced sweeping changes to many areas of financial lending, automobile dealers and financers were expressly excluded from oversight by the CFPB. Despite this express limitation on the CFPB’s authority, the Bureau nonetheless expanded its definition of “larger participants” to encompass automobile dealers and financiers. This action has resulted in duplicative regulatory oversight and increased costs to consumers, which in turn, imposes additional burdens on those …

The Customer's Nonwaivable Right To Choose Arbitration In The Securities Industry, Jill I. Gross

Brooklyn Journal of Corporate, Financial & Commercial Law

Arbitration has been the predominant form of dispute resolution in the securities industry since the 1980s. Virtually all brokerage firms include predispute arbitration agreements (PDAAs) in their retail customer contracts, and have successfully fought off challenges to their validity. Additionally, the industry has long mandated that firms submit to arbitration at the demand of a customer, even in the absence of a PDAA.

More recently, however, brokerage firms have been arguing that forum selection clauses in their agreements with sophisticated customers (such as institutional investors and issuers) supersede firms’ duty to arbitrate under FINRA Rule 12200. Circuit courts currently are …

The Challenge Of Fiduciary Regulation: The Investment Advisors Act After Seventy-Five Years, Roberta S. Karmel

Brooklyn Journal of Corporate, Financial & Commercial Law

Seventy-five years after its enactment the Investment Advisers Act of 1940 has advanced from a relatively weak statute merely registering advisers with the Securities and Exchange Commission (SEC) to a more robust law imposing fiduciary responsibilities on advisers. Over the years, the number of investment advisers and the number of their clients have increased greatly. The SEC therefore has been pressured by Congress to develop a harmonized fiduciary standard for broker-dealers and advisers and also to develop and enforce a greater degree of oversight over the advisory industry. These developments have raised the questions of how to fund such efforts …

Regulatory Arbitrage, Extraterritorial Jurisdiction, And Dodd-Frank: The Implications Of Us Global Otc Derivative Regulation, Christian Johnson

Christian A. Johnson

No abstract provided.

Reforming The Regulation Of Community, Tanya D. Marsh

Indiana Law Journal

The regulatory framework for financial institutions in the United States imposes significant costs on community banks without providing benefits to consumers or the economy that justify those costs. The Dodd-Frank Wall Street Reform and Consumer Protection Act builds on decades of “one-size-fits-all” regulation of financial institutions, an ill-conceived regulatory strategy that puts community banks at a competitive disadvantage as compared with their larger, more complex competitors. The imposition of regulatory burdens on community banks without attendant benefits ultimately harms both consumers and the economy by (1) forcing community banks to consolidate or go out of business, furthering the concentration of …

Banks, Break-Ins, And Bad Actors In Mortgage Foreclosure, Christopher K. Odinet

Christopher K. Odinet

The Future Of The Private Label Securities Market, David J. Reiss

David J Reiss

The PLS market, like all markets, cycles from greed to fear, from boom to bust. The mortgage market is still in the fear part of the cycle and recent government interventions in it have, undoubtedly, added to that fear. In recent days, there has been a lot of industry pushback against the government’s approach, including threats to pull out of various sectors. But the government should not chart its course based on today’s news reports. Rather, it should identify fundamentals and stick to them. In particular, its regulatory approach should reflect an attempt to align incentives of market actors with …

Regulatory Arbitrage, Extraterritorial Jurisdiction, And Dodd-Frank: The Implications Of Us Global Otc Derivative Regulation, Christian Johnson

Nevada Law Journal

No abstract provided.

Does State National Bank Of Big Spring V. Geithner Stand A Fighting Chance?, Devon J. Steinmeyer

Chicago-Kent Law Review

Two years after the start of the 2008 financial crisis and during one of the worst economic recessions since the Great Depression, Congress passed a law designed to insure a financial crisis of the same magnitude would not occur again, and if it did, it would not have the same wide-reaching effects the 2008 crisis had. The Dodd-Frank Wall Street Reform and Consumer Protection Act sought to, among other things, end “too big to fail,” consolidate the consumer protection agencies, and provide for the orderly liquidation of defaulting systematically important companies. State National Bank of Big Spring v. Geithner, a …

Banking And The Social Contract, Mehrsa Baradaran

Scholarly Works

This article asserts that there exists today and has always existed an interdependent relationship between banks and the state. I refer to this connection and its mutual benefits and responsibilities as a social contract. When Alexander Hamilton responded to President Washington’s inquiry about the advisability of a national bank, he wrote that “such a Bank is not a mere matter of private property, but a political machine of the greatest importance to the State.” This social contract has existed since the inception of banking in the United States and has been reinforced over time, but it has recently become weakened …

Clearinghouses As Liquidity Partitioning, Richard Squire

Faculty Scholarship

To reduce the risk of another financial crisis, the Dodd-Frank Act requires that trading in certain derivatives be backed by clearinghouses. Critics mount two main objections: a clearinghouse shifts risk instead of reducing it; and a clearinghouse could fail, requiring a bailout. This Article’s observation that clearinghouses engage in liquidity partitioning answers both. Liquidity partitioning means that when one of its member firms becomes bankrupt, a clearinghouse keeps a portion of the firm’s most liquid assets, and a matching portion of its short-term debt, out of the bankruptcy estate. The clearinghouse then applies the first toward immediate repayment of the …

Three Proposals For Regulating The Distribution Of Home Equity, Ian Ayres, Joshua Mitts

Faculty Scholarship

The Consumer Financial Protection Bureau’s recently-released “qualified mortgage” rules effectively discourage predatory lending but miss an equally important source of systemic risk: low-equity clustering. Specific “volatility-inducing” mortgage terms, when present in a substantial cluster of mortgage contracts, exacerbate macroeconomic risk by increasing the chance that the housing and lending markets will have to absorb a wave of simultaneous defaults after a downturn in housing prices. This Article shows that these terms became prevalent in a substantial proportion of residential mortgages in the years leading up to the home mortgage crisis. In contrast, during the earlier “amortization era” (when mortgagors were …

Burning Down The House Or Simply Rolling The Dice: A Comment On Section 621 Of The Dodd-Frank Act And Recommendation For Its Implementation, Joshua R. Rosenthal

Fordham Journal of Corporate & Financial Law

Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act modifies the Securities Act of 1933 to prohibit the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity of an asset-backed financial product from betting against that very product for one year after the product’s initial sale. The rule prohibits anyone who structures or sells an asset-backed security or a product composed of asset-backed securities from going short, in the specified timeframe, on what they have sold, and labels such transactions as presenting material conflicts of interest. This Comment discusses traces …

Dodd-Frank, Regulatory Innovation, And The Safety Of Consumer Financial Products, Melissa Jacoby

Melissa B. Jacoby

Among the many parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act, few have received as much mainstream attention as the creation of the Bureau of Consumer Financial Protection. As is often the case with legislation in recent years, though, some of the most vocalized critiques of the Bureau lack a foundation in Dodd-Frank as enacted or in the Bureau’s start-up efforts. This brief essay explores the nature of the Bureau and its promising possibilities for regulatory innovation that should transcend stale debates about regulatory overreach or command-and-control approaches. This commentary also reviews the unusual dialogue preceding Dodd-Frank …