Within the Scope - Administrative Law and the Public Sector. The Becker-Posner Blog. August 30, 2009 Do We Need More Regulation of Mortgages to Protect Consumers? --Posner The Treasury Department in its "white paper" of June 17 recommended the creation of a "Consumer Financial Protection Agency," and later followed up with a detailed legislative proposal for a "Consumer Financial Protection Agency Act of 2009.
" The proposal is pending in Congress. Although the Commission's remit would not be limited to mortgages, risky mortgage lending is the Act's principal target. A recent, and very thorough, article, by Oren Bar-Gill, "The Law, Economics and Psychology of Subprime Mortgage Contracts," 94 Cornell Law Review 1073 (2009), argues that many consumers made themselves worse off by taking out mortgages during the boom (in fact the bubble) period because they could not respond rationally to the offers by the sellers of mortgages. Bar-Gill's concern with inadequate disclosure of the annual percentage interest rate of mortgages does not present a novel regulatory issue.
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