Law Reform and Financial Markets

Law Reform and Financial Markets

Elgar Financial Law series

Edited by Kern Alexander and Niamh Moloney

Law Reform and Financial Markets addresses how law reform can be used to support strong financial markets and draws on the global financial crisis as a case study.

Chapter 7: The Crash that Launched a Thousand Fixes: Regulation of Consumer Credit after the Lending Revolution and the Credit Crunch

Iain Ramsay and Toni Williams

Subjects: law - academic, finance and banking law


Iain Ramsay and Toni Williams1 INTRODUCTION The consumer lending ‘revolution’2 – with its promise of the democratisation of credit – was followed by the credit crunch. The credit crunch has stimulated both immediate regulatory initiatives and more fundamental reflection on consumer credit regulation.3 As the Turner Review in the UK 1 An earlier draft of this chapter was presented at the University of Tokyo, 9 March 2009. We thank those who made comments, in particular Professor Hi-san Hirose. 2 See Federal Deposit Insurance Corporation, Evaluating the Consumer Lending Revolution (2003), available at fyi/2003/091703fyi.html and R. Brown and S. Burhouse, ‘Implications of the Supply-Side Revolution in Consumer Lending’, 24 St. Louis University Public Law Review, 363 (2005). This revolution included: financial liberalisation, deregulation of interest rates, securitisation, the application of sophisticated computer technology to develop predictive credit scores and risk-based pricing, and the increasing spread of all-purpose credit cards. 3 In the UK these include: ‘A New Approach to Consumer Credit’ in A Better Deal for Consumers: Delivering Real Help Now and Change for the Future, Cm 7669 (London: TSO, 2009); ‘Supporting and Protecting Consumers’ in HM Treasury , Reforming Financial Markets, Cm 7667 (London: TSO, 2009); HM Treasury, A New Approach to Financial Regulation: Judgment, Focus and Stability, Cm 7874 (London: TSO, 2010), ch 4; Financial Services Authority, Consultation Paper 10/16, Mortgage Market Review: Responsible Lending (London: FSA, 2010); and HM Treasury/Department of Business Innovation and Skills, Call for Evidence in Support of the Consumer Credit and Personal Insolvency Review (2010)...

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