Consumer protection in financial services has failed. A crisis is now playing itself out in the mortgage, credit card, auto loan, title loan, refund anticipation loan, and payday loan markets. Consumer protection was a traditional element of states' regulatory power until federal preemption ousted states from almost all direct regulation of federally chartered banks without substituting equivalent protections and enforcement. This Article argues that one avenue may remain to permit states to engage in consumer-protection regulation of federally chartered banks. Recent changes in financial markets have placed the majority of consumer debt in the hands of secondary-market entities, such as securitization trusts and debt collectors, which are not protected by federal preemption. States' ability to regulate the secondary consumer debt market directly also gives them the ability to regulate the primary market indirectly, even when direct regulation of the primary market would be preempted.
Adam J. Levitin,
Hydraulic Regulation: Regulating Credit Markets Upstream,
Yale J. on Reg.
Available at: http://digitalcommons.law.yale.edu/yjreg/vol26/iss2/2