The Law and Economics of Consumer Debt Collection and Its Regulation

71 Pages Posted: 9 Sep 2015  

Todd J. Zywicki

George Mason University - Antonin Scalia Law School, Faculty; PERC - Property and Environment Research Center

Date Written: September 9, 2015

Abstract

This article reviews the law and economics of consumer debt collection and its regulation, a topic that has taken on added urgency in light of the announcement by the Consumer Financial Protection Bureau that it is considering new regulations on the subject. Although stricter regulation of permissible debt collection practices can benefit those consumers who are in default and increase demand for credit by consumers, overly-restrictive regulation will result in higher interest rates and less access to credit for consumers, especially higher-risk consumers. Regulation of particular practices may also have the unintended consequence of providing incentives for creditors to more rapidly escalate their efforts to more aggressive collection practices, including litigation. Finally, the CFPB should take care to avoid imposing disproportionate regulatory burdens on small firms that would reduce competition and promote further consolidation of the industry. Therefore, before enacting any new regulations, the CFPB should be careful to ensure that the marginal benefits to consumers and the economy of new regulations exceed any costs arising from unintended consequences.

Keywords: debt collection, consumer demand for credit, Consumer Financial Protection Bureau

JEL Classification: D11, D12, D14, D18, G28

Suggested Citation

Zywicki, Todd J., The Law and Economics of Consumer Debt Collection and Its Regulation (September 9, 2015). George Mason Legal Studies Research Paper No. LS 15-17; George Mason Law & Economics Research Paper No. 15-33. Available at SSRN: https://ssrn.com/abstract=2658326 or http://dx.doi.org/10.2139/ssrn.2658326

Todd J. Zywicki (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8091 (Phone)
703-993-8088 (Fax)

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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