In the interest of providing more protection for consumers from the predatory practices of credit companies, President Barack Obama recently proposed the creation of the Consumer Financial Protection Agency. Currently, consumer protection is a task relegated to several different government agencies.
Unfortunately, these agencies are primarily tasked to protect the interests of financial institutions and consumer protection is a secondary objective for most of them. In contrast, the primary aim of the Consumer Financial Protection Agency is to protect consumers from the deceptive and fraudulent practices of credit companies and other similar businesses that offer them credit, loans, mortgages and other types of finances.
The credit industry is less than thrilled over this and is bent on stopping the proposal. Their argument is that the the agency will stifle creative in the credit industry and will make it more difficult for them to adjust their products according to the needs and the risks of the consumer. In fact, there are many arguments as to whether the Consumer Financial Protection Agency is a good or bad move.
For those who are advocating the agency, they are seeing it as a great equalizer for credit card holders and credit card companies. Current credit company practices usually focus on earning profits from consumers through fees and interest payments. It is therefore in the interest of credit companies to encourage their customers to get into debt and stay in debt. Using convoluted and deceptive language, credit companies make consumers pay minimal amounts towards the closing of their debts, redirecting most of the payment towards the more profitable interest and fee charges. With the proposed consumer protection agency in place, these kinds of practices will be stopped. Credit companies will be forced to be more transparent with their practices. Consumers will also have better protection from any other fraudulent and deceptive practices of credit companies.
However, many see that the creation of the Consumer Financial Protection Agency ultimately spoils the consumer. They argue that the agency will basically, remove the need for consumers to maintain responsibility over their credit. As a result, consumers will become less inclined to educate themselves and discipline themselves financially. This will lead to more unwise spending among consumers which will lead to another economic downturn in the future.
Most of the arguments over whether the Consumer Financial Protection Agency is good or bad have their merits. However, the fact of the matter is that the current credit industry setup is very much biased towards the credit companies and there is a very real need to correct that as soon as possible.