Financial Services Attorney Nadav Ariel

News and Resources

Trending: A Principles-Based Approach To US Financial Regs

Manley Williams & Nadav Ariel

March 24, 2015

While the United States has traditionally utilized rules-based policies, there has been a recent trend toward integrating principles-based policies and behavioral economics in regulating consumer financial products. For a framework of applying behavioral economics- and principles-based regulations, U.S. regulators, such as the Consumer Financial Protection Bureau, need look no further than across the pond.

Early adopters of principles-based and behavioral economics-guided policies have been the Financial Conduct Authority, which regulates financial products in the United Kingdom, and its jurisdictional predecessor, the Financial Services Authority. Indeed, the FSA’s enforcement actions in the U.K. credit card add-on industry foreshadowed similar actions in the U.S. by the CFPB. The FCA’s recent regulatory proposals governing aftermarket automotive financial products, combined with the CFPB’s recent investigatory focus on similar products, suggest that the U.K. experience may be instrumental in anticipating developments here.

Originally printed in Law360; reprinted with permission.