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Too Many Laws

Recent editions of this column have focused on the shortage of legal services to the poor and the middle class. One cause of this shortage is that we seek remedies for our societal problems through legislation, and as a consequence, minor personal matters affecting ordinary middle class people become enmeshed in seemingly Byzantine regulations that should realistically apply to complex institutions. This creates a need for legal services, which are often not available because of the shortage of lawyers willing and able to provide them. This column offers some examples.

Recently the Consumer Financial Protection Bureau issued some new regulations in accordance with the Dodd-Frank Act. (The fact that we have a Consumer Protection Finance Bureau or a Dodd-Frank Act is a prime example of our underlying problem.) The purpose of the changes is to simplify real estate closings and give borrowers more time to review and understand their loan documents. However, as one software provider stated: ”Making things simpler for consumers can increase complexity on the back end.” One of the results is to slow down the closing process to allow the borrower to review the newly simplified information. However, the information required to be disclosed to borrowers, while useful to individuals reasonably conversant in financial matters, is of less help to the unsophisticated without professional help. Also, what if the borrower is not happy with what is disclosed - remedies require more professional help.

This is only a recent example of regulators’ reliance on disclosure as a means of consumer protection. However, much of the information disclosed is in a form that requires some expertise to understand. In addition to disclosure, the consuming public is bombarded with contracts - often containing dense verbiage. Think of the recurring amendments to credit card agreements and the ever-present “Accept” on software downloads. Again, more need of professional help (even in some instances for lawyers).

Another example of regulatory complexity is how the Internal Revenue Code has grown in response to decades of “reform” efforts. Once the Internal Revenue Code could be carried in one hand as a paperback book. Now, to quote an on-line tax code, the “complete Internal Revenue Code is more than 24 megabytes in length . . . and printed 60 lines to the page it would fill more than 7500 letter sized pages.” Most of the changes were put in place to address the concerns of major industries or to attempt to correct perceived inequities. However, for whatever reason they were adopted, the amendments have made the everyday personal tax return more and more complicated. Were it not for the availability of on-line tax preparation software, most taxpayers would have to hire professional tax preparers – more complexity for the middle class and more business for professionals.
There is not much we can do to reverse this trend other than to radically change the way our society is governed. What we can do is create more affordable professionals to help the average citizens work their way through the maze.