From the President: Financial watchdog would promote lower-cost products, consumer choice, and innovation

Written by Dory Rand on July 17, 2009 - 10:44am

Encouraging simple, low-cost financial products through the Obama administration’s proposed financial watchdog agency would increase consumer choice and product innovation, not restrict it.

Under the administration’s proposal, financial services providers would be required to offer consumers simple, low-cost alternatives alongside more complicated, higher-cost products.

Consider the impact this type of comparison shopping would have on tax refund lending. In Illinois, 38 percent of low-wealth people take out tax refund anticipation loans when they file tax returns, spending nearly $64 million per year in fees. If offered a lower-cost alternative at the point of sale, such as direct deposit, consumers would be presented with a straightforward choice—wait a few days for a free refund or pay high fees and get a refund a few days earlier. Sadly, this type of choice has not been widely available in the marketplace.

Under the disastrous, hands-off regulatory approach of the past decade, Illinois communities saw millions of dollars in wealth stripped away by deceptive-by-design products that were unclear and unfair. Encouraging financial institutions to compete for customers by offering the best-priced, most consumer-friendly product (without the reams of fine print) makes perfect sense.

Dory Rand