Stephen Hall, Legal Director and Securities Specialist for Better Markets, participated in a panel discussion on cost-benefit analysis Wednesday, July 29, during a CFPB virtual symposium.
Hall was joined by panelists Jerry Ellig, research professor of George Washington University; Brian Hughes, executive vice president and chief risk officer, Discover Financial Services; Howell Jackson, Professor of Law, Harvard Law School; and Amit Narang, regulatory policy advocate, Public Citizen. Susan Singer, deputy assistant director, office of research panelist, served as the moderator.
In his written remarks, Hall set forth a critique of quantitative cost-benefit analysis and raised special concerns about its use at the CFPB.
“In our view, requiring agencies to conduct quantitative cost-benefit analysis in their rulemaking process does more harm than good. Cost-benefit analysis is inaccurate and biased; costly and burdensome; and often divorced from the type of economic analysis that Congress actually intended the agency to conduct under its organic statute. It also rests on the false premise, routinely advanced by the regulated industry, that regulation threatens to impose crushing burdens, ultimately harming consumers by eliminating supposedly valuable “choices” in the financial marketplace. In fact, these claims have consistently proven to be false throughout the history of financial regulation.”
Hall went on to flag the drawbacks of cost-benefit analysis as applied at the CFPB.
“The agency has served for much of its history as an extraordinarily effective champion of consumer protection. Unfortunately, under the current administration, the agency has strayed from its foundational mission in both rulemaking and enforcement. To the extent the CFPB embraces ever-more exhaustive and quantitative cost-benefit analysis, notwithstanding its limited duty under the law, its ability to effectively protect consumers from fraud and abuse will be further compromised. That may gratify payday lenders, student loan servicers, mortgage companies, and other financial institutions that often prey on consumers, but it will betray millions of everyday Americans who rely on the CFPB to protect them.”
Hall also pointed to the CFPB’s recent rollback of the payday lender underwriting requirements as proof that cost-benefit analysis is either hopelessly inaccurate or subject to manipulation by agency leadership to achieve desired outcomes—or both. You can read Hall’s full written remarks here and find the agenda for the symposium is here.