Thursday, July 02, 2009
Editorial: Consumer financing needs added oversight
Any worry concerning choices should be about making them fair and transparent.
From the RoundTable blog
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The Obama administration proposes creating a Consumer Financial Protection Agency with broad powers to regulate any lender in an industry whose products range from mortgages to credit cards to payday loans.
"This agency will have only one mission -- to protect consumers," Treasury Secretary Timothy Geithner wrote in a statement Tuesday that coincided with delivery to Congress of a 150-page proposal to change the way the lenders do business.
Borrowers need the protection. So do taxpayers.
A $700 billion, taxpayer-funded bailout for the banking industry is evidence enough. Countless random acts of interest rate increases on nondelinquent credit card bills, too many instances of small, short-term loans turning into spiraling debt traps serve merely to reinforce the message.
Yet the opposition is marshalling its forces: Strict rules will limit consumer options, congressional Republicans fret. Curtailing the scams -- or creative solutions to credit problems, if one prefers -- might increase the cost of borrowing for everyone. And that GOP classic, courtesy of Alabama Rep. Spencer Bachus, ranking Republican on the House Financial Services Committee:
"The proposed CFPA appears to be premised on the idea that Washington is better at making financial decisions for all Americans than leaving that choice up to individual Americans."
No, the proposed agency appears to be premised on the idea that Washington is better at forcing financial institutions to deal transparently and fairly with their customers, so that leaving choice up to individual Americans is an honest endeavor not open to trickery or fraud.
Whether Washington actually is up to the job is an open question. That the job needs doing is not.
The financial services industry is busily working to build heavy resistance. In truth, a 150-page proposal for a new regulatory body is bound to be filled with particulars that should be scrutinized and debated.
Washington insiders should know, though: Outside the beltway, where people are tired of feeling skinned, the need for such an agency is apparent.
