!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Elizabeth Warren on Credit Market Regulation

Monday, February 23, 2009

Elizabeth Warren on Credit Market Regulation

I imagine just about everyone has had at least some experience with the frustration of trying to determine the precise details of the terms governing particular financial products, such as credit cards.

For me, the worst instance was when I needed to find out how much my various credit card providers charge for overseas purchases and cash advances. I went to one bank's site, found the FAQ, went to the question about overseas transactions, and discovered that the "answer" was to go read the applicable portion of my (inpenetrable) credit card agreement. I.e., it seemed there was no way the bank was going to provide a clear answer to a basic question about their charges and fees.

As I recall, I was finally able to get the needed information by phoning the customer service number and asking my question several times to make sure I understood exactly what to expect if and when I started using this particular card outside the US. Needless to say, I was not impressed by the bank's attitude toward providing information to its customers.

You can read a clearly argued recommendation for fixing the problem of financial firms' obfuscation concerning their products' terms and conditions, not to mention the firms' predatory lending and other sharp practices, in an article by Elizabeth Warren. Warren is a professor at Harvard Law School and also Chair of the Congressional Oversight Panel charged with monitoring the federal bank bailout program and with developing recommendations for reform of financial regulation.

Warren's thesis is that
Consumers entering the market to buy financial products should enjoy the same protection as those buying household appliances. Just as the Consumer Product Safety Commitssin (CPSC) protects buyers of goods and supports a competitive market, a new regulatory agency is needed to protect consumers who use financial products.The time has come to recognize that regulation can often support and advance efficient and more dynamic markets.
The responsibilities of a Financial Product Safety Commission would be to:
establish guidelines for consumer disclosure, collect and report data about the uses of different financial products, review new products for safety, and require modification of dangerous products before they can be marketed to the public.
The basic principle is that the government, as rule-setter, should appropriately assist people in managing financial risk.

You can also get the flavor of Warren's views on modernizing financial regulation in the video below, posted at YouTube by the aforementioned Congressional Oversight Panel.