Last week the Federal Reserve released some long awaited new credit card rules that will provide important new protections for consumers.  They represent some of the biggest changes to the regulation of the credit card industry in decades.  While new restrictions and rules are necessary and long overdue to correct inadequate regulation and abuse of consumers in the credit card industry, there are additional steps that can and should be taken.

Earlier this year, New America published a paper by Michael Barr, Sendhil Mullainathan and Eldar Shafir, which has several interesting proposals to improve financial services regulation, including credit card regulation.  The proposals are based on insights from behavioral economics and include an opt-out credit card, new regulations for late fees, and an opt-out credit card payment plan.

Ellen Seidman, director of Financial Services Policy in the Asset Building Program, recently sat down for a short discussion with Michael Barr of the University of Michigan Law School and Eldar Shafir of Princeton University for a short discussion on their new paper Behaviorally Informed Financial Services Regulation.

If you’re like me, you have no interest in foolishly looking at the dwindling numbers in your retirement plan. Luckily, I’m decades away from retirement and can afford occasional market volatility. My initial concern during this crunch, however, wasn't the fluctuating values in our nest eggs. Instead, my worry was that employers might draw back from automatic enrollment programs, and that new employees might consider opting out of plans more frequently. Not so, according to people smarter than myself. According to a recent Chicago Tribune article, not only has the number of companies automatically enrolling employees in retirement plans doubled, but there shouldn’t be much cause for concern that, despite what looks like prolonged doom and gloom for our economy, companies may find auto-enrollment less attractive.

For behavioral economists (and their many fans), this probably comes as no surprise—default options work. What the article argues and suggests by its title, however, is that automatic enrollment (despite its increasing popularity) is insufficient in creating a robust nest egg at current match rates. Likely true, though the Tribune makes it seem as though auto-enrollment is a static business decision by saying that it “may create a false sense of security and discourage workers from putting more away.” A false sense of security is an issue, of course, but I would argue that a balance of $0.00 in an employer-sponsored plan is far, far riskier.

The real fix lies in automatic escalation—the next generation of automatic enrollment.

I'm at the third annual Underbanked Financial Services Forum, sponsored by the Center for Financial Services Innovation, a ShoreBank affiliate (full disclosure: I also work for ShoreBank and chair CFSI's board), along with my New America colleague Alejandra Lopez-Fernandini. As usual, the agenda is chock full of people and firms innovating in the responsible provision of financial services to underbanked and unbanked consumers.

The conference opened last night with a presentation by Richard Thaler, the University of Chicago professor who is in many ways the father of behavioral economics as applied to financial services. Thaler was one of the authors (with Shlomo Benartzi) of the Save More Tomorrow Program, which encourages employees to sign up to automatically have an increasing portion of any raise put into their retirement accounts and which was one of the critical pieces of research leading to the "opt-out" provisions of the Pension Protection Act of 2006.

Thaler spoke about his new book "Nudge," written with University of Chicago law professor Cass Sunstein. The book builds on the concept of "libertarian paternalism," and adds the concept of "choice architecture." Simply put, the concepts remind us that:

• We are constantly forced to make choices, including choices about how to manage our finances
• "Doing nothing" is not only a choice, it is the most common choice people make
• The structure or "architecture" of choice influences the choices we make, and in particular since we often choose to do nothing, the portion of that architecture relating to the "default" is critical
• Consciously choosing the "default" to be beneficial to the consumer can encourage asset-building behavior while still allowing consumers to choose other options