Behavioural Law and Economics : Regulatory Reform of Consumer Credit and Consumer Financial Services

The authors examine the influence of behavioural research upon economic policy-making, as it relates to the regulation of consumer credit and consumer financial services. Using the examples of credit cards in the United States and Australia, and retirement savings' infrastructure in the United States, New Zealand and Australia, we investigate the impact of 'nudging' upon regulation in these areas, and the degree to which such policies are capable of substantive change without the support of mandatory measures and other forms of targeted regulation. We conclude that nudging, alone, is not sufficient to achieve effective regulatory reform, and that other policies recommended by behavioural economics, such as mandatory measures and other forms of targeted regulation, are also required to achieve durable change in consumer behaviour. In light of this conclusion, we suggest that 'nudging' is best viewed as a regulatory supplement, or one of a range of regulatory tools, and that more attention should be focussed on the full range of behavioural law and economics regulatory reform recommendations, especially in the areas covered by this article