Summary
We support consumer financial service protection in the form of requirements for transparent disclosure of fees and charges rather than prohibition of services or fees. We support consumer protection for health and safety based on a careful cost/benefit analysis of the impact of the regulations.
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Background
Consumer Protection in Financial Markets
The recent attempts to regulate banks and credit card companies to protect consumers from various fees and charges have provided a good illustration of the futility of some kinds of overly specific regulation.
Credit cards, checking accounts, and personal loans will not be provided for free. Commercial banking is a competitive business. Banks offer a wide variety of services to a variety of customers. If banks and other financial institutions are prohibited from imposing fees for one service or on one group of customers, they will impose those fees on other customers or they will cease to offer the services. Efforts by the federal government to protect one class of customers will probably not succeed in protecting that group at the expense of the financial institutions, but rather at the expense of other consumers or at the expense of the customers the government is trying to protect.
Regulations to prohibit so called “payday lenders” strike us as particularly counterproductive. People who use these lenders do so because they have no other source of credit and need the money. This industry is competitive with many service providers. The high interest rates in this industry, therefore, reflect the high default rates and not “predatory” lending. The only role for the government here seems to be to make sure that the lenders fully disclose the terms of the loan.
In general, we support consumer protection, in terms of financial services, in the form of transparent disclosure of fees and charges rather than prohibition of services or fees.
Consumer Protection for Health and Safety
We support consumer protection for health and safety as carried out by the Food and Drug Administration (FDA), the Department of Agriculture, and the Consumer Products Safety Commission. These agencies need to be fully funded so that they can conduct appropriate cost/ benefit analysis of their proposed regulations. To a certain extent these agencies should be self funding. The FDA, for example, should be able to charge drug manufactures enough for the review of proposed drugs to cover the cost of the process.
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