Consumer Protection for the 21st Century

Brian Johnson, previous acting director at the CFPB USA, has spoken about the mission of protecting the consumer in the market of products and financial service. In his speech, he discussed the role of the bureau in putting the commercial interests of the banks ahead of the consumers.

So when considering the protection of consumer rights, it is a presumption that the choice of the consumer guides us. The consumers should be free to choose the financial products that suit them. It is also essential that consumers always have adequate information about financial products.

Below is the brief recap of the key points discussed by Brian Johnson in his speech.

The Essential Relation Between Liberty and Human Flourishing

First of all, it is essential that consumers have to know what is best for them and their families. The decentralization approach in the markets can address the problems more effectively than the centralized, top-down approach. The bureau is also taking the benefits of the marketers very seriously. This is because the markets play an essential role in the lives of the consumers and improve the lives of ordinary people. The past is the guide to the future, and it is proved that economic progress is the result of individual autonomy and political freedom.

20th Century Experiment: Planned Vs. Market Economies

The collapse of planned markets is due to a variety of ill-planned policies. At the end of the 20th century, we saw the destruction of the soviet union and the emergence of capitalism that boosted the markets. So, proper functioning of the markets requires specific rules, property rights, courts for regulating the laws, and regulating agencies. These are needed to play a significant role in the economic system.

Role of Government to Support Free Markets

Any economic system depends on three primary regulators.

  • Competition in the market place
  • Rights of the contracts, property, and legal obligations.
  • Public Agencies

The primary function of these regulators is to reinforce the market with competition and help the consumers to get the best products at the best price. The market also provides feedback about the products and makes them more cautious regarding the demands of the consumers. The market also incentivizes the producers to maintain quality in the products.

There is an old saying that 80% of the business comes from 20% of your customers. There are repeat consumers for any business. Without repeat business, the owners will lose money and fail in the business. Courts of law and government agencies serve as the primary place of defense and redress for property disputes.

Components of Consumer Protection

There are mainly three types of components.

  • Disclosures to them about the products and services provided.
  • Combating the unlawful practices by participants of the markets.
  • Command and control over the prices, terms, and products offered.

Federal and state consumer protection laws have typically focused narrowly on consumer welfare and are directed at misleading or confusing information about products and services.


All the marketers need to disclose all the information regarding the products and financial products so that the consumers have a clear idea and consumers can also compare the products and prices. The Bureau is also helping to lead the charge toward efficient and effective disclosures that respect consumer autonomy and leverage the economy high-tech advances. If the disclosures are found to be unlawful and misleading, then measures shall be taken.

Command and Control Product Design

Providing the details of the marketers and prices are the best policies that promote consumer protection and also restrict some of the prohibited financial products. The government does not allow you to buy the toaster that is not working well and having a chance of burning. Similarly, in the case of a financial loan, the loan is an exchange of promises that allow the borrower to fulfill some of the basic needs and fulfill the dreams. Taking a loan is linked with many emotions, so the government is taking care of protecting the rights of the consumer.

Principals of Regulatory Intervention

Nature of the Markets

There should be certain principles that govern the policy-making of the markets. The market can produce more ideas or products that cannot be thought by a single mind. Also, we should recognize that unintended and unseen consequences raised by policy-making can create problems for consumers.

Intended and Unintended Consequences

When designing a financial product or policy, it is essential to identify the intended advantages and unintended consequences that might occur. A good economist not only takes into account the effects that can be seen but also considers the impact that cannot be seen. The market financial regulations have both intended and unintended effects on the consumer. So CFPB should intervene in the regulations and analyze the rules and consequences.

Political Economy and Regulations

All the political economy concerns are needed to be analyzed by the bureau. Regulatory actions, by their nature, prescribe or prohibit specific economic behavior and consequently benefit some while burdening others. The rules should not be in favor of some big industries while making a loss to others. Here the situation is created in such a way that the new business cannot make to the market and big companies make the products price expensive. So the rules are making profit only for the big industries. The main goal of the bureau is to represent the voice of all the consumers and improve consumer welfare.

Taking the Individual Liberty Very Seriously

Any individual must be given liberty to chose the right product or service. A person must use observation to see, activity to gather materials for decision and when decided, he should possess the firmness and determination to hold on to the decision made. Effective decision making is made through a trial and error process. Most of the decisions are made by getting verbal feedback or by observing successful or failure decisions made by individuals. The dignity of a person lies in respecting the individual choices made through liberty.


The entire speech is worth to read very carefully, but the point is straightforward. The process of lending money to the consumers also called credit increases the wealth of the economy. The consumer is taking a loan in the present with an intent to repay in the future. The present loan amount is used for purchasing and other economic uses. So it is essential that the regulatory bodies keep an eye on the consumer credit and do not ignore the primary purpose of the consumer credit.