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Posts Tagged ‘consumers lack of financial knowledge’

Consumer Financial Protection Agency or Sense on Cents

Posted by Larry Doyle on June 17th, 2009 9:27 PM |

A large initiative embedded in President Obama’s financial reforms is the launching of the Consumer Financial Protection Agency. Why does President Obama feel it is necessary to launch such an agency? For the very same reason I was compelled to launch Sense on Cents earlier this year.

The Wall Street Journal provides insights on this agency in writing, A New Consumer Agency With Enforcement Teeth:

President Barack Obama’s proposed regulatory revamp includes sweeping changes to help consumers make informed decisions about financial products, save for retirement and get better investment advice.

A centerpiece is the creation of a Consumer Financial Protection Agency with authority to write and enforce rules across a slew of financial products.

Firms would also have to offer “plain vanilla” versions of products — such as a mortgage that does not include prepayment penalties and has predictable payments — along with their other offerings. The goal is to make it easier for consumers to shop around without worrying about hidden fees.

“The new agency is about making consumer credit markets work,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, which oversees the government’s Troubled Assets Relief Program. Ms. Warren had proposed the idea of a financial-products safety commission in an article published in the journal Democracy in 2007.

“It’s not possible for a customer to compare three or four credit-card products and determine which one is the cheapest and which one poses the least risk,” Ms. Warren said. “This agency is about changing that.”

Consolidating the job of consumer oversight into one agency could help resolve consumer disputes more quickly and effectively.

Clearly the financial industry has not had the interests of consumers at heart. Why are so many investors dissatisfied with their banks, brokers, and financial planners? The financial companies and individuals did not protect the customers. More often than not, brokers and bankers themselves were ill equipped to understand the dynamics at work within products, the market, or the economy. (more…)






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