- Reason Awakes -

Regulation and Consumer Protection


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 and checking accounts will not be provided for free. If banks and other institutions are prohibited from imposing fees on one group of customers they will impose those fees on other customers or they will cease to offer the services. The federal government did not succeed in protecting the group of customers that they were focused on, at the expense of the banks, but rather at the expense of other consumers. 

Regulations to prohibit so called "pay day lenders" strike us as particularly counter productive. 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, therefor, 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.





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