Consumer Protection, Legal Services, and Financial Stability: An Exchange

23 Pages Posted: 16 May 2011

See all articles by Melissa B. Jacoby

Melissa B. Jacoby

University of North Carolina School of Law

Anna Gelpern

Georgetown University Law Center


This exchange between us recasts the challenge of consumer financial protection and its implications for financial stability. Jacoby illustrates how the channels of production of formal law (non-uniform state law, uniform state law, federal law) fail to coherently reflect the functions of ex post consumer debtor protection. Channels of production shape the market for the services of lawyers and other intermediaries. Law schools reproduce categories of practice and thought based on formal rather than functional boundaries. Repeated exaltation of form over function helps explain why even good laws fail financially distressed consumers: individuals’ ability to use the best law for their circumstances can hinge on the specialization of the lawyer next door. Consistent with many prominent law-in-action studies, Jacoby presents evidence that changing the substantive laws on the books is often insufficient, and occasionally unnecessary, to protect consumers. Structure can matter more.

Gelpern considers the implications of Jacoby’s findings for systemic risk management and crisis response. Financial technology made it possible to multiply and spread consumer debt throughout the financial system, with pockets of risk concentration in critical places. It follows that creating a stable financial system requires capacity to manage household debt on a large scale. The fragmented infrastructure Jacoby identifies does not merely fail individuals, but can frustrate economic policy, delay crisis response, and undermine financial stability.

Keywords: bankruptcy, financial stability, systemic risk, consumer protection, foreclosure

JEL Classification: D18, G28

Suggested Citation

Jacoby, Melissa B. and Gelpern, Anna, Consumer Protection, Legal Services, and Financial Stability: An Exchange. Fordham Urban Law Journal, Vol. 38, 2011, UNC Legal Studies Research Paper No. 1829686, American University, WCL Research Paper No. 2011-13, Available at SSRN:

Melissa B. Jacoby (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States

Anna Gelpern

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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