Available at: https://ssrn.com/abstract=4921426
Abstract:
This article examines the relationship between two complementary and related consumer financial protection approaches: regulatory oversight of financing terms (ex ante protection) and bankruptcy discharge of consumer debts (ex post protection). Although often conceptualized as distinct areas of law, consumer financial regulation and consumer bankruptcy are two sides of the same coin and function together to treat the harms of financial distress. This article seeks to explore the relationship and tensions between these various approaches by juxtaposing consumer debtor-creditor law attitudes and legal developments in continental Europe (primarily France and Germany) with those in the United States. After a brief overview of consumer indebtedness in the United States, Part I examines consumer financial regulation trends in the United States, France, and Germany. Part II compares and contrasts US, German, and French approaches to consumer bankruptcy and outlines some recent developments in insolvency law in these systems. Part III explains why optimal consumer protection laws should recognize the importance of both ex ante regulation and ex post bankruptcy discharge and should embrace the complexity inherent in debtor-creditor law. The article concludes with a brief consideration of how and why legal reforms should act holistically to improve the financial wellbeing of the most economically vulnerable consumers in society.
Commentary:
While this article contrasts consumer protection in its ex post form of American bankruptcy discharges with ex ante European financial regulation, describing "consumer financial regulation and consumer bankruptcy are two sides of the same coin and function together to treat the harms of financial distress", similarly I have often compared (and bemoaned) how even in just within the U.S. there has been a lack engagement by both attorneys (including their organizations such as NACBA and NACA) and policymakers (including the Department of Justice and the CFPB) on either side of the gulf between bankruptcy and consumer rights statutes such as the FDCPA and FCRA. Hopefully, this article and Prof. Boyack herself can serve as an additional encouragement to bridging that gap.
The comparison of the bankruptcy regime in the United States, focused on Chapter 7, with those particularly in Germany and France, which appear to require repayment efforts (or at least debtor oversight) for 6 and 2 years, respectively, would likely have benefited from a deeper evaluation of the success rates of those and also with Chapter 13 bankruptcy in the U.S., which, with its 3-5 year plans, has a far lower discharge rate and is held in a consequently lower opinion by many American legal academics. Knowing how debtors fare under these European insolvency plans would be enlightening.
With proper attribution, please share this post.
To read a copy of the transcript, please see:
Blog comments