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Making Credit Safer

Oren Bar-Gill and Elizabeth Warren’s Making Credit Safer begins by noting that, while physical products, from toasters to toys, are routinely inspected and regulated for safety, credit products, like mortgage loans and credit cards, are left largely unregulated, even though they can also be unsafe. Because financial products are analyzed through a contract paradigm rather than a products paradigm, consumers have been left with unsafe credit products. Bar-Gill and Warren use the physical products analogy to build a case, supported by both theory and data, for comprehensive safety regulation of consumer credit and propose a fundamental restructuring of this current regulatory regime, urging the creation of a new federal regulator that will have both the authority and the incentives to police the safety of consumer credit products.