Consumer Finance Working Group
Completed: June 2014
Between 2009 and 2014, RSF, together with the Alfred P. Sloan Foundation, supported a Working Group on Consumer Finance and Behavioral Economics. The working group brought behavioral economics research to bear on analyzing consumers’ financial decision-making in order to inform regulatory strategies designed to improve consumer welfare. Among the questions the group addressed: How well do consumers understand the various kinds of loan contracts they enter into? Might different contractual formats improve consumer understanding? Is understanding alone sufficient to maximize consumer welfare, or do consumers need further protection against their own behavioral weaknesses (like impatience or overconfidence), which may get them into trouble even when they fully understand contractual terms? If so, what form should those protections take? Are warnings sufficient? Could default options be usefully deployed? Or, are some credit products so dangerous that outright bans are necessary, and if so, how do we decide which products those are? In addition to fostering basic research on these and related questions, the working group explored the implications of this research for potential regulatory strategies to protect consumers from financial products and services that may prove dangerous to their financial well-being.
For more information about the working group and members’ projects, please click here.