The financial system is a critical engine that keeps the economy vibrant. Serving consumers faced with unanticipated expenses, investors planning their futures, and small businesses looking to expand, it creates economic opportunities for all participants in society. In recent years, however, worries about too-big-to-fail and too-small-to-borrow have led many to question whether financial markets are working the way they should.

Consumers benefit greatly from increased competition in any market, especially a credit market.

We appreciate the opportunity to respond to the proposed rulemaking by the Bureau of Consumer Financial Protection (CFPB or Bureau) on payday, vehicle title, and certain high-cost installment loans. The Mercatus Center at George Mason University is dedicated to bridging the gap between academic ideas and real-world problems and to advancing knowledge about the effects of regulation on society. This comment, therefore, does not represent the views of any particular affected party or special interest group but is designed to assist the Bureau as it considers whether—and, if so, how—to proceed with rulemaking regarding small-dollar lending. More generally, this comment seeks to assist the Bureau in embracing a regulatory approach that serves consumers by fostering competitive, innovative, accessible, and diverse credit markets.

Thomas Miller appears on the Dividends Show to discuss his recent testimony on consumer finance and the small-dollar loan landscape before the U.S. House Financial Services Subcommittee. He also shares with host, Jeffrey Rupp, how small-dollar loan markets work and how best to restructure regulation to improve borrower welfare.

Competition guarantees that the borrowers will receive loans at the lowest possible cost and highest possible customer service—in both large- and small-dollar loan markets. Read more at Mercatus.org

We remain puzzled by Google’s decision. Protecting and helping consumers is a noble goal. Limiting access to credit, however, isn’t the way to do it.

Conversations about consumer credit often reflect utopian visions of the world. Many people imagine that a few tweaks to regulations can ensure that everyone has the money needed to feed, clothe, and shelter the family. According to this logic, if households need to...

Although life insurance agents and lenders provide socially important products, few people get lively when thinking about them. Fewer still get excited about lenders who also sell life insurance on loans. While few people have even heard of an important insurance product known as credit insurance, many borrowers rely on this product for peace of mind. What is credit insurance? Borrowers sometimes worry that they will not be able to pay back their loan due to unforeseen events. The market, of course, provides a way to calm these anxious borrowers by allowing them to add a product to their loan: credit insurance.

Consumer advocates, regulators, and legislators must stand courageously and do what the far-sighted reformers did 100 years ago: allow for much higher interest rates on small-dollar loans. The cost to consumers is low. A 108% APR on a $300, 12-month installment loan costs only $2.94 per week more than a similar loan at a 36% APR. Consumers should have the choice to pay this additional pittance. The trifling amount can help eliminate the loan desert.

President Barack Obama recently opined that he would like “to see the first two years of community college free for everybody who is willing to work for it.” This important proposal from the president’s State of the Union Address has already gained support from Dr. Amy Gutmann, president of the University of Pennsylvania. Obama, Gutmann and I all agree that higher education has a high value. Yet we likely disagree on its price.