BOSTON--(BUSINESS WIRE)--Four professors, spanning four schools at Harvard University, published an open letter to the to-be-named director of the Consumer Financial Protection Bureau (CFPB), in this month’s issue of Harvard Business Review. The professors offer much needed advice based on their collective work and research in economics, law, public policy, and business.
In “Making Financial Markets Work for Consumers,” John Y. Campbell, a professor of economics at Harvard University; Howell E. Jackson, a professor of law at Harvard Law School; Brigitte C. Madrian, a professor of Public Policy and Corporate Management at Harvard Kennedy School of Government; and Peter Tufano, formerly a professor of financial management at Harvard Business School, suggest eight ways that the director might identify problems that deserve early attention: Look for high stakes; look for confusion; look for regret; look for folly; look for suckers; look for rip-offs; look beyond product names; and look for opportunities.
While the authors admit that they cannot tell the to-be-named director how to go about protecting consumers and tackling the many problems that will present themselves, they point out the ways for selecting appropriate policy responses. “You have a wide range of tools at your disposal to help you meet your mandate,” write the authors. “They include educating and providing advice to consumers, requiring information disclosure by firms, setting standard terms that will be appropriate for most consumers, and prohibiting unfair, deceptive, or abusive practices.” Campbell, Jackson, Madrian, and Tufano also encourage the incoming director to keep the following issues in mind:
- Principles, people, politics, and pet projects may be an influence. We urge you to focus on the first two and beware the pull of the later two.
- Your aim should be not only to police bad behavior but also to stimulate the kind of innovation that benefits consumers.
- The bureau should take an early stance on innovations as they come to the market.
- The best businesses are evidence-driven in their decision making, and we believe that the bureau should be, too.
- Although Washington politics may make you hesitant to acknowledge failure, you must do so to make progress.
- We believe that the corporate world offers some lessons that may be particularly useful in your new job: focus on data and independent analysis, fail forward, and pick your metrics with care.
In closing, the authors write, “We wish you the best of luck in your new task, and we urge you to use your authority to promote a more vibrant consumer finance sector, whose businesses voluntarily supply products that offer better value to consumers and whose consumers make more informed and intelligent financial decisions. If you succeed, we’ll all be better off. As scholars of consumer finance, we stand ready to assist you in your task.”
Harvard Business Review’s Editor-in-Chief, Adi Ignatius, also commented, “HBR is committed to publishing practical ideas about how to fix the financial system. The bureau directorship is a very important new oversight role, and our informed team of writers is offering very smart advice on how the job should be done.”
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