Do We Need a Consumer Financial Product Agency?
Many of our Massachusetts bankruptcy clients who come in for a consultation say that they would be able to pay their bills if only the interest rate on their credit card hadn’t jumped so high because of one late payment. The credit card “agreement” they signed has so many clauses that enable the banks to do whatever they wish, when they wish. There are very few contract clauses to help the consumer in these situations.
Harvard University’s Elizabeth Warren, who grew up poor in Oklahoma, is a tenured professor at Harvard Law School and has been appointed to chair the Congressional Oversight Panel.
She is charged with monitoring the federal bailout of the financial institutions; her task is to examine how they spent the $700 billion bailout. For many years, Ms. Warren has been advocating that we need a few federal agency: the Consumer Financial Product Safety Commission. The model for the new agency is the U.S. Consumer Product Safety Commission, an independent health and safety regulatory agency founded in 1972 by the Nixon Administration. Most folks would agree that this federal agency has added tremendous benefits to society. Since 2001, Canada has a financial products agency, which from all reports seems to be working quite well.
Among other things, Ms. Warren envisions that the Consumer Financial Product Agency will review credit card agreements. “It will focus on one, driving question: Are consumer financial products explained in a way that consumers can understand and that allows the market to work?” For years, she has pointed out that credit card “agreements” went from simple one page documents to sometime up to 30 pages; few consumers read these contracts, even fewer understand them, and the result is that the credit card companies can do whatever they wish once you start using the card, especially after you are late or miss a payment.
Interestingly, the US Chamber of Commerce is spending over $2,000,000 to defeat Ms. Warren’s efforts. They claim to have produced over 23,000 letters to Congress.
You can review Ms. Warren’s blog for more information on her work and thoughts.