Law Review: Jacoby- Consumer Protection, Legal Services, and Financial Stability: An Exchange; Gelpern- Financial Stability Is a Volume Business: A Comment on the Legal Infrastructure Of Ex Post Consumer Debtor Protections‏

Abstract: This two part article is an exchange between Prof. Melissa Jacoby and Prof. Anna Gelpern examines 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 ----- This article beats on a drum that I've been banging for a long time, namely that there needs to be greater interaction between the various "ex post consumer protections", i.e. bankruptcy, FDCPA, Truth in Lending Act, Real Estate Settlement Procedures Act, Home Ownership and Equity Protection Act, Equal Credit Opportunity Act, Community Reinvestment Act, UCC, etc. ----- This article can be found at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1829686