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Levitin's Consumer Finance: Markets and Regulation

posted by Adam Levitin

I'm very excited to announce the publication of a new book, Consumer Finance:  Markets and Regulation.  The book (also available on Amazon) is the first consumer finance textbook in existence. It's the product of several years of teaching a course I call Consumer Finance.  The course, and the book, largely track the regulatory ambit of the CFPB:  payments, credit, and consumer financial data. 

The book is divided into two parts.  The first part covers the question of "who regulates" consumer financial products and services.  It covers regulation by private law (including arbitration agreements), state regulation, and then spends a lot of time going through the ins-and-outs of the CFPB's rulemaking, supervision, and enforcement powers and specifically UDAAP.  Much of this part of the book is what I think of as "applied" administrative law.  The second part of the book covers specific consumer financial product markets and their regulation: deposits and payments, credit and collections, and financial data.  While some chapters focus on particular products (e.g., auto loans or student loans or mobile wallets), others focus on topics of broader applicability (e.g., usury or fair lending or credit cost disclosure). 

Although the book is marketed as a "casebook," it hardly is.  There are maybe 20 cases in the whole book.  Instead, most of the book is expository material plus non-case materials, such as litigation complaints, regulatory materials, or transactional documents (e.g., arbitration agreements, parts of a deposit account agreement, a uniform note and mortgage).  Each chapter ends with a problem set.  It's possible to teach the book either solely through the problem sets or as a lecture course without the problem sets or some combination thereof.  There's also a handsome companion statutory supplement.

If you're interested in teaching consumer credit policy or electronic payments and data security issues, this is a course and a book for you.  (Don't take my word, however--ask Bob Lawless, who generously taught a draft version of the book last year and is teaching the published version of the book this semester.) 

Many of us who study consumer credit  have taught consumer bankruptcy law—that was, prior to 2010, where the regulatory action was.  It was back-end regulation through the discharge, and bankruptcy was the only window in the financial lives of the middle class.  That's changed, and our teaching and scholarship needs to adapt.  (See here for how I think the teaching of bankruptcy law needs to adapt.)  The action today is on the front-end through the CFPB (even under current management), and the CFPB and private data sets have generated a lot of data about households' finances that just wasn't available a decade ago.  Teaching consumer credit policy through bankruptcy was always a bit awkward because it only touched on the loans that went bad, and never got into the lending process itself.  It was all very roundabout.  In a consumer finance course, one gets address the policy issues directly and in the context of the actual regulations.  For example, it's hard to bring a discussion of payday loans into a consumer bankruptcy course, but a consumer finance course is tailor-made for it. 

There's a lot of path dependence in what we teach in law schools--we have notes for our old courses, there are books already available, etc.  But there are moments when changes in the regulatory landscape call out for a change in the curriculum.  This is such a moment.  In 1933 no one was teaching securities regulation in law schools.  Today it's a standard offering.  The creation of the CFPB should have the same transformative effect.  Just as securities regulation became a regulator topic in the curriculum by the 1940s, so too, I'm hoping will consumer finance become a standard offering in the next few years. 

Let me emphasize (as this has been a source of confusion) this is NOT a consumer law book.  It is a consumer finance law book and that's a separate and different area, even if there is some overlap.  Consumer finance law is the regulation of retail financial services.  That is to say, it's more of a banking law book than a consumer law book.  I've never personally understood the design of the traditional consumer law course.  It's always been an odd grab-bag of subjects:  TILA, Magnusson-Moss, odometer fraud, telemarketing regulations, etc.  There's no jurisdictional coherence to the course, and to the extent that there's an intellectual cohesiveness, it's provided by a focus on protecting the consumer from rapacious business practices.  

Prior to 2010, consumer finance law was not a cohesive field either. There were nearly twenty relevant federal statutes plus a bevy of state laws (and regulations thereunder), spread out over numerous agencies.  The creation of the CFPB changed all that and brought an intellectual coherence to the field.  Now most (although not all) of federal consumer finance regulation is part of the CFPB's bailiwick.  (The Higher Education Act and the Military Lending Act and some rules under the FTC Act are the major exceptions.)  There is a jurisdictional coherence to designing a course to track the regulatory domain of the CFPB (with some extensions to cover student loans).  This also generates intellectual coherence for the course, in that the regulatory issues are kept more narrowly focused on financial products, rather than on goods and services.

Consumer finance law also fills in a major gap in the financial regulation curriculum.  The traditional banking law course is primarily a prudential regulation course--what are banks allowed to do and how do we regulate them to prevent them from failing.  There will usually be a class session or two spent on consumer financial services with some mention of TILA and the CFPB, but it's pretty superficial coverage.  (I should know--that's what I'm teaching this semester...)  There's an enormous regulatory apparatus for retail financial services, and it's been largely ignored in the law school curriculum in the past. It shouldn't be. 

The other thing that's different in a consumer finance class is that the focus is not just on the consumer.  It's also on the businesses that provide financial services to consumers and the risks they assume and how they address them.  One can't teach students in a meaningful way about the problem of the unbanked without talking about the economics of deposit accounts and the risks bank face from extended overdrafters.  If you want to talk about funds availability, you've got to get into the problem of check kiting.  And if you want to explain the covenants in a mortgage, you've got to consider the problem of occupancy fraud.  The book tries to deal with both sides of the coin, consumers and businesses.

So that's my pitch.  And remember, if you want an unconflicted second opinion, ask Bob!

Comments

A few years ago and not knowing that Adam was working on these materials, I had independently come to the conclusion that the law school curriculum needed a consumer finance course. My reasons were practical. This is a set of laws that many attorneys will encounter and increasingly so. It is a course that helps students prepare for the practice of law and in a wide variety of practice settings. I was thrilled to discover that Adam had a set of materials.

Commercial law types comfortable with the problem method (like me) will find the book's approach familiar. I have not taught it as a more traditional lecture course, but I can see where it would work well for that format as well. There is a comprehensive teacher's manual available as well.

The course seems to have been well received here at Illinois. A happy side effect was that my students last year seemed to feel like that they also had learned a lot of information that would help them in their personal lives.

Thanks Bob. Those comments are positively effusive by your standards!

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