On Wednesday, we mentioned the appointment of behavioral economist Sendhil Mullainathan to head the CFPB's Office of Research. Those interested in how behavioral economics might inform financial services regulation may want to take a look at this New America Foundation policy paper that Mullainathan co-authored in 2008 with Michael Barr and Eldar Shafir. It's called "Behaviorally Informed Financial Services Regulation." You can also watch this YouTube video in which Shafir and Barr discuss the paper.
The paper discusses ten ideas:
- Full information disclosure to debias home mortgage borrowers.
- A new standard for truth in lending.
- A "sticky" opt-out home mortgage system.
- Restructuring the relationship between brokers and borrowers.
- Using framing and salience to improve credit card disclosures.
- An opt-out payment plan for credit cards.
- An opt-out credit card.
- Regulating credit card late fees.
- A tax credit for banks offering safe and affordable accounts.
- An opt-out bank account for tax refund.