18 March 2019

post-GFC consumer protection

With the Hayne Royal Commission in mind it is interesting to see 'Consumer Protection After the Global Financial Crisis' by Edward Balleisen and Melissa B. Jacoby in (2019) 107(4) Georgetown Law Journal.

The article comments
Like other major events, the Global Financial Crisis generated a large and diffuse body of academic analysis. As part of a broader call for operationalizing the study of crises as policy shocks and resulting responses, which inevitably derail from elegant theories, we examine how regulatory protagonists approached consumer protection after the GFC, guided by six elements that should be considered in any policy shock context. After reviewing the introduction and philosophy of the Bureau of Consumer Financial Protection, created as part of the Dodd-Frank Act of 2010, we consider four examples of how consumer protection unfolded in the crises’ aftermath that have received less attention. Our case studies investigate a common set of queries. We sought to identify the parties who cared sufficiently about a given issue to engage with it and try to shape policy, as well as the evolving nature of the relevant policy agenda. We also looked for key changes in policy, which could be reflected in various forms—whether establishing an entirely new regulatory agency, formulating novel enforcement strategies, or deflecting policy reforms. 
The first of our case studies focuses on operations of the Federal Trade Commission in the GFC’s aftermath. Although the Dodd-Frank Act shifted some obligations toward the CFPB, we find that the FTC continued to worry about and seek to address fraud against consumers. But it tended to focus on shady practices that arose in response to the GFC rather than those that facilitated it. Our second case study examines the Congressional adoption of a carveout from CFPB authority for auto dealers, which resulted from strong lobbying by car companies worried about a cratering sales environment, and the aftermath of the policy. Here, we observe that this carveout allowed a significant amount of troubling auto lending activity to continue and expand, with potentially systemic consequences. Loan servicer misbehavior, particularly in the form of robosigning, is the focus of our third case study. Although Dodd-Frank did not explicitly address robosigning, the new agency it created, the CFPB, was able to draw on its broad authority to address this newly arising problem. And, because the CFPB had authority over student loan servicers, the agency could pivot relatively quickly from the mortgage context to the student loan context. Our fourth and final case study is the rise and fall of Operation Choke Point, an understandably controversial interagency program, convened by the U.S. Department of Justice, which, with the GFC fresh in mind, attempted to curtail fraudulent activities by cutting off access to online payment mechanisms. Here, we see an anti-fraud effort that was particularly vulnerable to a change in presidential administration and political climate because its designers had invested little effort in building public awareness and support for the program. 
The Article concludes with an overall assessment and suggestions for other focal points for which our approach would be useful. The examples span a range of other domestic and global policy contexts.
In Australia ACCC Chair Rod Sims has told the National Consumer Congress that 'There should be a law in Australia prohibiting the sale of unsafe goods'.
 Using new data the ACCC estimates the annual cost of injury and death caused by unsafe consumer products is at least $5 billion and could be much more. Excluding motor vehicle accidents, there are around 780 deaths and around 52,000 injuries per year from consumer products that many Australians have in their homes. 
“Many people are surprised to learn that it is not illegal to sell unsafe goods in Australia,” Mr Sims said. “There is no law that says goods have to be safe, but there should be.” Examples of harm include electrocution from faulty appliances, burns from ignited flammable clothing, choking on children’s toys and suffocation in cots and beds. 
The ACCC says there is a need for the Government to adopt a General Safety Provision obliging companies to take reasonable steps to avoid supplying unsafe goods. 
“For consumers, a General Safety Provision will give greater confidence that the goods they buy are safe. And for business, it will create a level playing field so that those firms who deliberately supply cheap but unsafe products do not derive a financial benefit,” Mr Sims added. 
On the eve of World Consumer Rights Day on March 15, the ACCC announced its 2019 Product Safety Priorities, with the Takata airbag recall remaining a primary concern, and a continuation of the ACCC’s work on button battery safety. 
‘We are continuing our work in preventing button batteries ending up in the hands of our infants and children,” Mr Sims said. “Each week too many Australian children present to hospital as a result of button batteries, which can be deadly. This must change.” 
Other 2019 ACCC Product Safety Priorities include preventing injury and deaths to infants caused by unsafe sleeping products and improving the safety of products that are sold online. 
An additional focus for the ACCC in 2019 will be examining potential consumer safety hazards associated with interconnected and smart devices. “Our challenge in product safety is to anticipate these future risks before they arise and make sure the regulatory framework is fit for purpose.”